Stone Ridge ILS assets hit $5.7 billion, growth slows to 4%

Growth in insurance-linked securities (ILS) and reinsurance linked assets under management slowed at U.S. mutual fund manager Stone Ridge Asset Management during its last reported quarter, with its net ILS assets increasing by just 4% to $5.7 billion by the end of April.

It’s a bit of a slowdown in the growth of assets at Stone Ridge, which has seen its net ILS assets under management rise extremely quickly in the past.

Of course, given the ILS and catastrophe bond market is only so large, net asset growth can be a little restricted for managers, as they reach a size that makes up a relatively significant proportion of the sector, as Stone Ridge has.

In the previous reported quarter, to end of January 2017, Stone Ridge had recorded around 9% growth in its total net ILS and reinsurance linked assets under management. So, despite the catastrophe bond market being extremely buoyant during the following months, the rate of growth has just about halved.

As has been the case since its launch, the Stone Ridge Reinsurance Risk Premium Interval Fund has led the manager’s growth once again, with its assets increasing by almost 6%, from $4.29 billion at the end of January 2017, to $4.526 billion at the end of April 2017.

The Stone Ridge interval style mutual ILS fund continues to dominate the investment manager’s participation in the reinsurance market. The bulk of its assets (76.4%) are still invested in reinsurance sidecars and other collateralised reinsurance arrangements, a slight drop, and now 15.9% are invested in event-linked bonds, so catastrophe bonds and private cat bonds, which is a slight increase and likely down to the record levels of cat bond issuance seen recently. Meanwhile 5% are invested in other ILS funds, again only managed by Aeolus Capital Management, with the remainder in short-term investments that aid liquidity.

The other ILS fund, the Stone Ridge High Yield Reinsurance Risk Premium Fund, has again seen a slight shrinking of its assets, going from assets of just over $1.2 billion at the end of January to $1.18 billion at the end of April.

Again, we assume this is partly down to investor churn and also investors switching into the Interval fund as well.

The Stone Ridge High Yield Reinsurance Risk Premium Fund remains largely focused on catastrophe bond investments, with 80.5%% of its assets invested in event-linked bonds, although this has shrunk slightly as it was 87% cat bonds at the end of January. As a result this fund now has 14.8% of its assets in reinsurance sidecars and other private collateralised reinsurance transactions, an increase in the reported quarter.

While growth has slowed a little at Stone Ridge, the quarter under report was dominated by catastrophe bond issues, while the collateralized markets will have seen some action in April with Japanese deals and sidecars, but not as significant as at January renewals.

With another $2 billion of assets committed to a post-event fund strategy as well, the mutual fund manager stands well-positioned to maintain the influence it is building in reinsurance and ILS markets.

It will be interesting to see how much Stone Ridge has increased its ILS assets under management over the next quarter, which will include the June and July renewals as well as much of the record second-quarter of catastrophe bond issuance. That should give the manager a chance to increase its ILS assets more significantly again.

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