Assets invested in catastrophe bond and insurance-linked securities (ILS) funds have grown as investors seek diversification from traditional fixed income markets, according to Morningstar’s report. Catastrophe bonds shift the risk of natural disasters, such as hurricanes, earthquakes and wildfires, from insurers to investors. According to Morningstar, the asset class has outperformed broad global bond markets over the past five years while maintaining low correlations with most traditional asset classes. Morningstar identified 43 catastrophe bond and ILS funds globally, managing a combined $37.7bn in assets. However, manager expertise, portfolio diversification and liquidity management are also critical considerations when evaluating catastrophe bond strategies.”