Stonybrook mulls launch of new Lloyd’s investment fund
New York investment boutique Stonybrook Capital is in discussions with potential investors for a new Lloyd’s-focused fund that would look to capitalise on the market’s renewed earnings potential, The Insurer can reveal.
According to sources, Stonybrook Capital is mooting the creation of a new US fund that would seek to gain participations on up to a dozen syndicates operating with third-party capital.
The development emerges as fundraising has begun in earnest for an ambitious new Lloyd’s fund, Solasta Innovations, which is seeking to raise £200mn+ to deploy on syndicates at 1.1.
Last week, Lloyd’s unveiled a better-than-expected H1 market-wide result of £4.9bn (combined ratio: 83.7 percent) as syndicates continued to benefit from the hard market pricing of recent years. It was the latest sign of the near-350-year-old market’s renaissance after heavy cat losses between 2017-2021 caused a major rethink in underwriting standards and cat aggregations.
The market has a mixed capital model. Most syndicates wholly own their capacity and then structure their underwriting capital with in-house group funding or via reinsurance. However, a significant minority of syndicates welcome third-party capital from either individual or corporate investors.
Last year saw the failure of an ambitious scheme to create a new UK-listed Lloyd’s investment fund, London Innovation Underwriters, with fund managers put off by the valuation discount of the current UK-listed fund, Helios.
Nonetheless, private investor interest in the market remains at heightened levels with attractions including limited correlation to conventional asset classes and the potential for strong earnings following the pricing reset of recent years.
Stonybrook Capital declined to comment on the initiative but sources involved in the preliminary conversations suggest the bank is mulling a fund that would look to initially be in the region of $25mn-$50mn and would be supported by senior management.
Aimed at both institutional and high-net-worth investors, the proposed scheme would be structured as a unit fund with pre-determined liquidity windows. It would be fixed term and would primarily aim for Funds at Lloyd’s investing but would consider other opportunities including membership of syndicates, according to sources familiar with the early discussions. Fundraising would begin in Q1 next year with a view to deploying funds either at mid-year or 1.1.26.
Stonybrook Capital has an established Lloyd’s franchise that includes a reinsurance broking subsidiary, Stonybrook Risk Management, which specialises in Funds at Lloyd’s reinsurance funding, ILW trades and specialty programs.
Led by founding chairman and CEO Joe Scheerer, partners include Chris Harman, an experienced Lloyd’s reinsurance executive who co-founded Harman Wicks & Swayne, which was acquired by JLT in 2008.
Former Everest Re veteran Paul Kneuer – who led the Bermudian reinsurer’s US/London structured reinsurance practice and advised on its Lloyd’s launch – is managing director, while Martin Davies, the former CEO of Towers Watson Capital Markets and AHJ Capital Markets, is an adviser to the firm.
Stonybrook is owned by two family offices and employees. Recent transactions include United Fire Group on a $70mn senior debt offering and acting as a financial adviser on Mutual Capital Group’s$73.8mn acquisition of ICC Holdings.