The first investments of a fund are crucial for long-term performance, says Peter G, the manager of the newly launched Nucleus Assurance fund 1.
G says that there is no shortage of opportunities in the European insurance sector as liquidity is still limited.
The asset manager says the Luxembourg-domiciled Sicav is designed to benefit from European governments seeking to privatise their pension and health systems. People are living longer and are thus more likely to need healthcare and critical illness insurance.
The asset managers, Quantum Group and Nucleus Euro-Advisers, aim to benefit from an expanding pensions sector as European citizens increasingly establish private savings plans.
We go for more specialised investments: smaller companies that have suitable assets and limited risks, G says. And we only invest in businesses where we have very good information.
At the moment, the 2m (1.8m) committed to the fund is still held in cash.
Weve been working on three to six [investment] opportunities, made an application for the first two and are evaluating another four.
He is still waiting for due diligence work and the authorisation of the first investment. By August, he expects to have at least five or six investments. In the long term, the Nucleus Assurance fund 1 aims to have 20-30 holdings.
The fund will primarily invest in bonds, convertible bonds and notes, issued by small and mid-cap insurers and re-insurers, brokers and underwriters.
For now, G is considering fixed interest and asset-backed investment opportunities only. We are not considering equity positions at this point and we dont want more than 20% equity exposure. We will only invest in equity positions when risks are well-defined and limited.
Over the next 24 months, he says, he aims to reach a fund size of 25m or more.
The fund has a target return of 250 basis points above the European Central Bank base rate. Nucleus Euro-Advisers has identified adviser distribution channels within Italy and Germany but the fund also has retail distributor status in Britain.
It has a minimum investment of 20,000 and an annual management fee is 1%.