Catastrophe (Cat) bonds can be powerful diversifiers in investors’ portfolios. Because the bonds are linked to natural catastrophic events and are not affected by what is happening in the financial markets, they tend to have very little correlation with traditional asset classes. Given that this asset class is still relatively young, investors and wealth managers still have many questions about these bonds.
Caleb Wong, Senior Portfolio Manager of Catastrophe Bond strategy, provides answers to many key questions on catastrophe bonds covering a wide range of topics—from the unique attributes of the bonds, to opportunities for investors in the current environment.
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Fixed income investing entails credit and interest rate risks. When interest rates rise, bond prices generally fall, and a fund’s share price can fall. Event-linked securities, otherwise known as Cat Bonds, are fixed income securities for which the return of principal and interest payment is contingent on the non-occurrence of a trigger event that leads to physical or economic loss. If the trigger event occurs prior to maturity, event-linked securities may lose all or a portion of their principal and additional interest. Diversification does not guarantee profit or protect against loss.
Mutual funds are subject to market risk and volatility. Shares may gain or lose value.
These views represent the opinions of OppenheimerFunds, Inc. and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the publication date, and are subject to change based on subsequent developments.