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.

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