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Higher rates add return for ILS as hedge fund attribution shifts

Agecroft Partners founder Don Steinbrugge says strategies holding cash or collateral, including ILS, benefit as elevated financing costs pressure more leveraged approaches.

Reported · Written up by our desk · Reinsurance

Higher short-term interest rates are adding a new return driver for insurance-linked securities, and the shift is also changing how hedge fund performance is attributed at the strategy level, according to an analysis from Agecroft Partners founder and CEO Don Steinbrugge.

Artemis reports that Steinbrugge’s recent write-up argues that, as macroeconomic conditions move, the underlying source of returns can matter as much as headline performance figures, with strategies that hold substantial cash or collateral such as quantitative funds, low-net relative-value and ILS seeing benefit.

The article also says highly leveraged strategies face mounting pressure from elevated financing costs, as investors can once again earn meaningful returns on cash and short-term Treasury securities after more than a decade of near-zero short-term rates.

Artemis adds that, as of September 2026, the Federal Reserve’s target range for the federal funds rate is 3.75% to 4.00%.

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