Stone Ridge Asset Management’s insurance and reinsurance linked assets under management shrank by another -4% in the latest quarter of record, finishing the period at $5.93 billion by the end of April as the manager continued to realise losses from catastrophes and redemptions.
It’s the first time the manager’s two flagship insurance-linked securities (ILS) mutual funds have seen their combined assets total fall below $6 billion since the middle of 2017.
Stone Ridge’s ILS and reinsurance assets under management (AuM) had reached as high as $7 billion at the end of April 2018, but the impacts of 2017’s hurricanes, the two consecutive years of California wildfires and other catastrophes including Japanese typhoon Jebi, have all combined to dent the total asset base of the manager.
In addition, it’s understood that some investor redemptions were also experienced by Stone Ridge, which is unsurprising given the back-to-back catastrophe years that hit its two dedicated ILS mutual fund investment strategies.
Earlier this year we reported that Stone Ridge Asset Management’s total net assets across its two dedicated ILS mutual fund strategies had fallen -11% to $6.15 billion at January 31st 2019, down from the $6.91 billion we reported at the end of October 2018.
Now, the total net assets of the two Stone Ridge ILS fund strategies have fallen again, but at a slower pace of just under -4%, to finish the latest reported quarter at April 30th 2019 at $5.93 billion.
That still leaves Stone Ridge as a top-ten ILS fund manager in our Insurance Linked Securities (ILS) Investment Managers & Funds Directory.
The fact the shrinking of assets has slowed reflects the fact that as time passes increasingly ILS fund managers like Stone Ridge are realising losses, dealing with trapped collateral issues and it’s to be assumed that the rate of any investor redemptions would also be slowing as a result.
There remain numerous positions in the Stone Ridge ILS portfolios that have valuations well below their cost price, suggesting there is more work to do and time to pass before the impacts of the last two year’s of catastrophes will be behind the manager.
However, there is also evidence of fresh investments and deployment into new collateralized reinsurance, sidecar, quota share and catastrophe bond issues as well.
The flagship ILS strategy, the Stone Ridge Reinsurance Risk Premium Interval Fund ended April 2019 with total net assets reported as $5.06 billion, down -4% from the $5.26 billion of ILS assets reported at the end of January for this fund.
The total cost of the investments in this Internal ILS fund portfolio is reported as just under $5.5 billion, while their value is reported as $4.7 billion, with the rest of the total net asset figure made up of short-term assets such as treasuries and other assets above liabilities such as receivables on securities sold.
The Stone Ridge High Yield Reinsurance Risk Premium Fund, which is much more focused on catastrophe bond investments as the main component of the portfolio, ended April 2019 with $876 million of total net assets, only slightly down from the $884 million reported at the end of January 2019.
This fund portfolio appears much more stable, as you’d expect from a more catastrophe bond investment focused strategy.
The cost of the ILS and collateralized reinsurance assets in the portfolio of this smaller Stone Ridge reinsurance fund is reported as being $954 million, while their value is reported as $881.5 million, which is very similar to the situation at Jan 31st.
So the impacts of the losses remain very evident in the Stone Ridge ILS fund portfolios, but the fact the shrinking in assets has slowed so much does bode well for the manager stabilising the portfolio’s losses and any outflows, which in time should mean the returns come back and new capital may be raised again.
Stone Ridge remains at number 6 in terms of assets under management in our directory of ILS Investment Managers & Funds.
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