Stone Ridge ILS & reinsurance assets jump by 15% to $4.44 billion

Stone Ridge Asset Management has continued its strong growth in its last reported quarter, with its insurance-linked securities (ILS) and reinsurance linked assets under management jumping 15% to an impressive $4.44 billion by 31st January 2016.

New York based Stone Ridge Asset Management, a beta and alternative risk focused mutual fund manager with three ILS mutual fund strategies that it offers through a network of registered investment advisors (RIA’s), has grown strongly once again, adding around $583 million of capital in the three months to the end of January.

That period of course includes the January reinsurance renewals, when many collateralised sidecar vehicles and other private ILS deals come to market and a number of new catastrophe bonds were issued, providing opportunities for investment managers to deploy newly raised capital.

Stone Ridge took this opportunity, adding the additional $583m to take the overall ILS assets to the $4.44 billion and deploying this into many new transactions and vehicles around the 1/1 renewal.

The majority of the growth in ILS and reinsurance linked assets at Stone Ridge has again been seen within the managers Interval fund structure, which has been the strongest growing fund. This makes sense as it is likely where Stone Ridge would rather the inflows go, as the Interval strategy allows more flexibility in terms of assets invested in due to the defined redemption rules.

Now a closer look at Stone Ridge’s ILS and reinsurance linked investment fund asset growth, across the three strategies.

Stone Ridge, which launched in late 2012 and raised assets of around $350m in two funds, the Stone Ridge Reinsurance Risk Premium Fund and Stone Ridge High Yield Reinsurance Risk Premium Fund, for the start of 2013 and has been growing steadily ever since.

The ILS and reinsurance linked assets managed grew to $766m by July 2013, then to $1.4 billion by January 2014 with the help of the launch of the Stone Ridge Reinsurance Risk Premium Interval Fund, then again to $1.8 billion by the end of April, then $2.03 billion at July 31st followed by another leap to $2.124 billion at the 31st October, then up another 42% reaching $3.006 billion at the 31st January 2015, then up 9.4% to $3.288 billion as at the 30th April 2015, to $3.713 billion at 31st July 2015, up another 13% or $425m, and then a further 4% to $3.86 billion by 31st October 2015.

The latest quarterly portfolio disclosure, covering the three months to the 31st January 2016, shows that Stone Ridge experienced a strong period of new investor inflows, with total net assets increasing by 15% to the $4.44 billion across the three mutual ILS funds

The Stone Ridge Reinsurance Risk Premium Interval Fund, which grew the most during the period, increased its net assets by an impressive 22% from $2.34 billion at the 31st October 2015 to just over $2.85 billion at the 31st January 2016, an increase of $510 million.

The lowest risk fund strategy, the Stone Ridge Reinsurance Risk Premium Fund, grew from $1.024 billion at 31st October to $1.084 billion at 31st January 2016, while the higher risk Stone Ridge High Yield Reinsurance Risk Premium Fund rose from $495.7 million to $506.3 million.

So it’s clear that the majority of the new inflows from investors were received into the Interval fund, enabling Stone Ridge to deploy significant new capital for the January renewal into sidecar vehicles, catastrophe bonds and other reinsurance transactions.

Of note are a roughly $17m allocation evenly spread across the three tranches of XL Catlin’s Galileo Re Ltd. (Series 2016-1) cat bond; a large $153m allocation to Munich Re’s Eden Re II sidecar which is notable as it’s not far off a third of the 2016 renewal of that vehicle; a $35m allocation to Aspen’s Silverton Re sidecar renewal; a $51m allocation to a Kane segregated account named Kauai; $25m to Kane cell Mojave 2; a $25m allocation to Altair Re IV a renewal of ACE’s sidecar; $42m to the new AXIS Re Ventures cell 0005; $15m to Rainier which is an account of Everest Re’s Mt. Logan Re; $19.3m to a Kane segregated account named Sugarloaf; around $60m to three Horseshoe Re segregated accounts; and $50m to a Kane cell named Twin Lakes.

Of particular not is one further Kane segregated cell transaction, named Emerald Lake, which saw Stone Ridge allocate $225m to it in December. These larger cells are likely to represent private quota share arrangements that Stone Ridge has entered into.

Stone Ridge also allocated a further $53m to another ILS fund managed by Aeolus Capital Management, the Aeolus Property Catastrophe J16 Keystone Fund. This takes the total amount Stone Ridge had invested in Aeolus funds at the 31st January to roughly $140m.

Interestingly the Interval fund portfolio also shows that Stone Ridge has invested in one weather derivative contract, an average temperature index option. Perhaps this shows that the manager has ambitions to enter the weather space and is trying it out through this small $1.25m contract allocation.

So Stone Ridge Asset Management has demonstrated continued strong appetite for its investment strategies, reflected in very strong growth. It will be interesting to see how much more growth has been achieved around the April renewal and again for the mid-year June and July renewal season.

There is every chance that Stone Ridge will be a $5 billion+ manager of ILS and reinsurance linked assets within the next few months, as the manager has clearly been able to source and attract plenty of opportunities to deploy new capital.

The latest growth makes Stone Ridge the fifth largest manager of ILS and reinsurance assets in our ILS Fund Managers Directory.