Stone Ridge hits $2Bn of ILS & reinsurance-linked assets for first time

New York based Stone Ridge Asset Management, provider of mutual fund investments in alternative risk exposures including reinsurance and insurance-linked securities (ILS), has passed the $2 billion mark between its three ILS funds for the first time.

The latest SEC filings from Stone Ridge Asset Management show that the investment manager has continued to grow the value and funds under management within its range of ILS and reinsurance linked investments.

Stone Ridge, which launched its first ILS funds in late 2012, has seen strong growth of its ILS assets having grown them from around $350m at launch, to $766m by July 2013, to $1.4 billion by January 2014 with the help of its newest Interval fund and then again to $1.8 billion by the end of April.

Now, Stone Ridge reports the total net assets of its three insurance-linked investment funds as just over $2.03 billion at July 31st 2014, with the majority of the growth being within its Stone Ridge Reinsurance Risk Premium Interval Fund. All three of the firms ILS funds invest in catastrophe bonds, ILS, industry-loss warranties (ILW’s), quota shares, longevity bonds, mortality bonds and other types of reinsurance securities, but the strategies differ in terms of risk, return and liquidity.

The Stone Ridge Reinsurance Risk Premium Fund, its lowest risk vanilla mutual fund strategy, had total net assets of $611.4m at the end of the first-quarter, which then increased to $722.4m by the end of April 2014. This fund has increased in size to $763m by the end of July of this year, a small increase and partly due to appreciation on the ILS assets held in the portfolio.

The Stone Ridge High Yield Reinsurance Risk Premium Fund, which has a higher risk and return target, had assets totaling $242.9m at the end of the first-quarter, which then increased by 28% to just over $311.1m at April 30th. This fund reached $319.5m by 31st July, which we’d imagine is purely appreciation on the invested assets rather than any new funds.

The Stone Ridge Reinsurance Risk Premium Interval Fund, its newest strategy which follows the interval fund approach of offering staggered liquidity opportunities to investors enabling it to invest in less liquid assets is now by far the largest of the three funds.

The Interval Fund had total net assets of just over $606m at the end of Q1 2014 and subsequently grew by 26% to have total net assets of $761.5m at the end of April. The Interval fund has grown strongly again, by another 25%, to reach total net assets of $948.8m under management in this strategy at 31st July 2014. That can’t be appreciation alone and shows that Stone Ridge has continued to take inflows into this fund through the start of the summer.

The Interval fund remains invested across a broad range of quota shares, sidecars and private ILS or collateralized reinsurance transactions in protected cells, showing the illiquid nature of an ILS strategy such as this.

The fact that the Interval Fund has grown so strongly suggests that the mutual fund investors that Stone Ridge targets through registered investment advisors and intermediaries are attracted to the interval fund approach. That news should please other investment managers looking at the interval structure for a mutual fund as a viable approach to raising new capital.

With total ILS and reinsurance-linked assets under management of just over $2.03 billion at July 31st 2014, Stone Ridge Asset Management remains firmly within the top ten ILS fund managers by size in our Insurance Linked Securities Investment Managers & Funds Directory.