Friday, June 6, 2008

Man and the ‘hurricane spider’

(FT Alphaville) Man marches on. This time the hedge fund group has snapped up a 25 per cent stake in Nephila Capital, as part of its strategy of buying into smaller rivals.

This one’s eye-catching for two main reasons. And it’s not the price - teeny for Man at $50m.

Firstly, Nephila is an insurance specialist, working with instruments such as insurance-linked securities, catastrophe bonds, insurance swaps and weather derivatives. Man’s buy, wrapping the Nephila stake into its environmental finance specialist Man ECO, a private equity manager, is another sign that, post-Enron, weather derivatives are again finding favour.

In particular, the deal underlines the expansion of interest in such products beyond the traditional demand base of insurers and reinsurers. Essentially, Man hopes to flog the specialist instruments to their broader investor base, who are interested by the supposed lack of correlation of weather-related products to traditional markets.

Secondly, what’s that name about?

According to Bermuda folklore, the silk spider Nephila clavipes is known for its ability to predict bad weather. It is called the “hurricane spider” since it spins its strong, golden web close to the ground when a hurricane is approaching and high up in the shrubs and trees when the weather is nice.

The silk web of a mature female can reach one meter in width, is particularly strong and is golden colored. The Nephila spider is also sometimes called the “Golden silk orb-weaver”.

Creepy. More on Wiki.

Related links
Man statement
Man Group intends to swallow smaller rivals - FT.com
Man looks for extra credit - Alphaville post
Sun shines again on weather derivatives - FT.com, June 07

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