Pioneer Fund Lets You Bet on the Weather
Last year, hedge funds made a mint betting that hurricanes wouldn't make landfall on the Atlantic coast of the U.S. Now small investors have a shot.
Pioneer Investments recently launched a closed-end mutual fund, the (HNW) Diversified High Income Trust (HNW), that can invest as much as 35% of assets in catastrophe bonds.
Catastrophe bonds, also known as "cat bonds" or insurance-linked securities, allow investors to bet on whether hurricanes and other natural disasters will strike and cause large insurance claims. They are typically issued by insurers or reinsurers who are looking for ways to offset some of their own exposure.
These investments carry big risks -- you can lose your entire investment, including the principal, if specific triggers are met and insurers are allowed to tap the money to pay damage claims. But they can also pay big returns. Interest rates on cat bonds soared after three major hurricanes battered the southeastern U.S. in 2005. But investors cashed in big time when the 2006 hurricane season turned out to be the mildest in years.This year's hurricane season, which begins June 1, is expected to be much more severe: The National Hurricane Conference is calling for between seven and nine major hurricanes and 17 named storms. It says there is a 74% chance a major hurricane will hit the East Coast. So anyone buying cat bonds now is betting that forecasters will get it wrong again.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV