AQR Capital Management set up a reinsurance group, with the goal of providing institutional investors with equity-like returns uncorrelated with other mainstream investment options.
In an interview, David G. Kabiller, a founding partner and head of client strategies with the firm, said AQR’s reinsurance strategy should launch by the end of 2011, with a funding goal of $250 million.
The company hired Andrew Sterge, the head of Magnetar Capital’s Bermuda-based reinsurance arm, Pulsar Re Holdings, as a vice president, to lead AQR’s reinsurance business. Justin Dini, an outside spokesman for Magnetar, couldn’t immediately provide further information.
In the interview, Mr. Kabiller said the lack of correlation between the returns a book of 50 or more insurance exposures, diversified by geography and type of “peril,” can deliver with other major asset classes such as global equities, bonds and commodities, led AQR to study the business following the failure of conventional diversification strategies to shield investors in 2008.
AQR’s leadership concluded that “we wanted to be an originator and portfolio provider of reinsurance to institutional investors,” said Mr. Kabiller.
The business is dominated by reinsurance companies, which accept premiums from insurance companies with concentrated exposures to specific regions or specific perils in return for taking on some of those companies’ potential pay-out exposures.