Stone Ridge’s mutual ILS fund assets stable, as cat bond growth continues

Stone Ridge Asset Management, the New York based asset manager with a focus on alternative risk premia strategies including reinsurance and insurance-linked securities (ILS), has continued to expand its more catastrophe bond focused mutual ILS fund strategy in the last quarter of record.

The continued growth of Stone Ridge’s most cat bond focused mutual ILS fund has helped to offset a continued decline in assets for the manager’s less liquid and more reinsurance sidecar and private collateralized quota share reinsurance focused interval mutual ILS fund.

When we last reported on the Stone Ridge mutual ILS funds, their assets under management had shrunk further to $3.08 billion at October 31st 2021, a decline of almost 9% in the three-months to that date.

However, Stone Ridge’s more catastrophe bond focused mutual ILS fund strategy, the lower-risk Stone Ridge High Yield Reinsurance Risk Premium Fund (SHRIX), grew 2% during that quarter to end October 2021 with net assets of $1.42 billion, a new high for the fund.

The Stone Ridge High Yield Reinsurance Risk Premium Fund has grown again in the quarter to January 31st 2022, adding almost 6% in assets to finish the quarter with just under $1.5 billion in assets, another new high for Stone Ridge’s more catastrophe bond focused strategy.

The higher-risk and reward, but less liquid, Stone Ridge Reinsurance Risk Premium Interval Fund (SRRIX), has continued to shrink though.

This interval style mutual ILS fund, that has a significant collateralized reinsurance sidecar and private quota share focus, ended October 2021 with $1.66 billion of net assets, which was a roughly 16% decline in that quarter.

As of January 31st 2022, the Stone Ridge Reinsurance Risk Premium Interval Fund has shrunk by another 7%, to end the quarter with $1.54 billion of assets.

Meaning that overall mutual ILS fund assets under management at Stone Ridge declined by just 1% in the last quarter of record, a much slower pace, as the manager ended January 2022 with around $3.04 billion of ILS assets across the two main mutual fund strategies it operates.

The slower decline in assets of the interval ILS fund may be a positive sign for Stone Ridge, with churn in terms of investors seeking an exit perhaps slowing down, while the manager has continued to shift investors into the cat bond focused strategy, where more appropriate, as well as into its private ILS fund strategies as well.

The firm’s CEO said in his last annual report letter that Stone Ridge has the highest forward conviction on the reinsurance sector since its launch in 2013.