Swiss Re Insurance-Linked Fund Management

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Board approves Stone Ridge ILS fund consolidation for December


The Board of Trustees of Stone Ridge Trust, the Trust that oversees some of U.S. mutual fund and insurance-linked securities (ILS) investment manager Stone Ridge Asset Management’s strategies, has approved the consolidation of two of its reinsurance mutual funds.

The consolidation, or reorganisation of one Stone Ridge managed mutual ILS fund into another, which we discussed a few weeks ago here, is set to be completed on or about the 5th December 2016.

Stone Ridge Asset Management is perhaps the fastest growing ILS fund manager of recent years, hitting $4.76 billion of ILS and reinsurance linked assets under management at the end of April 2016, across its range of three ILS mutual fund strategies.

Stone Ridge recently decided to consolidate its first two funds, the Reinsurance Risk Premium Fund and the High Yield Reinsurance Risk Premium Fund, into a single strategy. This is perhaps a way to simplify its offering to investors, or an acknowledgement that with returns now lower in ILS and reinsurance the yields possible in the market do not warrant two separate strategies of this kind.

Size of the funds is also an issue that likely factored in the decision, with a larger fund having more capital to deploy and take bigger slices of risk from reinsurance sidecars or catastrophe bonds and making the consolidated fund a more meaningful counterparty in the market.

By the end of April 2016 the Stone Ridge Reinsurance Risk Premium Fund had grown to $1.13 billion, and the Stone Ridge High Yield Reinsurance Risk Premium Fund hit $494 million. Both will have grown again over the last few months we’re sure, so the resulting consolidated fund should be a minimum of $1.6 billion in size we’d imagine.

So with approval now granted by the Trustees the Stone Ridge Reinsurance Risk Premium Fund will be reorganised with and into the Stone Ridge High Yield Reinsurance Risk Premium Fund, with investors receiving an equal amount of shares (in dollar value) in the newly consolidated fund.

So Stone Ridge will approach the next reinsurance renewals in January with two mutual ILS funds, wielding considerable capital and growing influence in the sector. Consolidating the funds will enable the manager to focus on its two core strategies, the most successful Interval ILS fund and now the one non-interval ILS mutual fund.

Also read:

– Stone Ridge to consolidate two of its ILS mutual funds.

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