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Opinion
Mark Gilbert

Trade of the Day: Buy Catastrophe

The Trade of the Day is to buy disasters; you'd have made more money investing in catastrophe bonds than hedge funds in the past decade.
The answer is blowing in the wind.                                                      
The answer is blowing in the wind.                                                      

Natural disasters inflicted economic losses on the world of just $54 billion in the six months to June 30, according to insurance company Aon Plc's Global Catastrophe Recap report. That's about half the 10-year average of $106 billion in the period, Bloomberg's Carolyn Bandel reported today.

So the Trade of the Day is to buy disasters, even if there is risk that mayhem will revert to the mean. As the chart below shows, you would have made more money investing in catastrophe bonds (according to Swiss Re's total return index) in the past decade than by entrusting your money to hedge funds (according to Credit Suisse's index).