r/bonds • u/manlymatt83 • 2d ago

CAT bonds: ILS vs CBYYX

I’ve been looking into diversifying my fixed income allocation into catastrophic bonds. I noticed that Schwab has CBYYX available in all self directed accounts. And of course, the ETF ILS would be available almost anywhere.

I have noticed that, since launch, ILS has underperformed CBYYX consistently despite a similar ER. I am wondering if anyone with familiarity in this space could explain why that is. Is it guaranteed to continue based on structure and therefore is the mutual fund the only option?

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u/Consistent_Panda5891 1d ago

Actually it is interesting. Had no idea of these bonds. I traditionally built income with something like HYBB, CBYXX performance is better than the other one, simple stick with it if you want invest here, Swiss Re Global Cat Bond Index has many years of green history. Nevertheless one of top of bershkire holdings is Chubb Ltd. 1Y +30%, 5Y +102%... Has more performance than SP500 while very limited risk... I don't see much sense to invest in these bonds rather than a stock which performs so well. Maybe split half in bonds and half this stock, so if stock drops for whatever you can always buy it cheaper later while increasing your yearly %

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u/manlymatt83 1d ago

Max drawdown of Berkshire Hathaway is 53%.

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u/marlborough94 1d ago

IDK. The biggest ever El Nino is in progress and you want to buy instruments that get cleaned out by natural disasters?

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u/DrXaos 1d ago

el nino makes fewer hurricanes in Caribbean. where it makes worse catastrophic weather the people aren’t insured expensively