Investing In Disaster

It’s often a smart strategy:

Catastrophe bonds – essentially a gamble on the likelihood of natural disasters – have been the fifth best-performing asset class since the financial crisis, according to research conducted by Deutsche Bank … If you had invested your money at the fall of Lehman Brothers in September 2008, only silver, gold, and high-yield debt from the US and the European Union would have made you more money.

Mike Riggs says catastrophe bonds have done well “because they have practically no relationship to financial markets”:

This doesn’t mean they’re particularly safe … [but] when the entire market can shift after a few comments from Federal Reserve chairman Ben Bernanke, as it did this week – or rests on the health of dubious bets from the financial industry – gambling on the likelihood of a natural disaster doesn’t sound like such a bad idea.