Pioneer Fund Lets You Bet on the Weather

Pioneer isn't just using these securities to juice returns, however. The money manager says cat bonds can also provide diversification because their returns are not correlated with either equities or corporate bonds. Kenneth Taubes, Pioneer's director of U.S. fixed income, says the goal of the Diversified High Income Trust is "to achieve a higher yield than traditional high-yield funds with lower volatility."

In addition to cat bonds, the fund will also invest in floating-rate bank loans and high-yield corporate bonds. Initially, it will allocate 37.5% of assets each to junk bonds and floating-rate loans and 25% in cat bonds, but eventually the allocation to cat bonds will rise to a maximum of 35%.

Pioneer raised more than $180 million in the fund's initial public offering, in which the company issued 7.3 million shares at an initial price of $25 a share.

Like many closed-end funds, Diversified High Income Trust will also use leverage, or borrowed money, of up to 33% of the fund's assets to juice returns. That means total assets could reach $260 million.

Investors will have to pay up for the privilege of getting exposure to this exotic asset class. The Diversified High Income Trust carries an estimated annual expense ratio of 1.59%. Part of that reflects the cost of hiring a subadviser, Montpelier Re(MRH Quote), to manage the cat bond portion of the portfolio.

And investors who acquired the fund through its initial public offering also paid a sales load, or brokerage commission, of 4.5%. That's in addition to fees of 0.2% to cover the offering expenses.