Stone Ridge ILS & reinsurance assets hit $4.76bn, growth slows slightly to 7%

The growth of mutual fund and insurance-linked investment manager Stone Ridge Asset Management’s insurance and reinsurance linked assets has slowed in the latest quarter, with the managers ILS assets under management rising by 7% to hit $4.76 billion at the end of April 2016.

That’s around half the 15% rate of growth of Stone Ridge’s ILS assets in the previous quarter, although that spanned the key January renewals of course, but it is also slower than was seen in the February to end-April period in 2015, when the managers ILS assets grew by over 9%.

Notable this quarter in the Stone Ridge report are some realised losses across all three of the mutual ILS funds managed, which is unsurprising given the breadth of exposure in the portfolios as well as the catastrophe and severe weather activity seen so far this year.

Despite this, the reports show all funds appreciating positively in the quarter, reflecting the benefits of a broadly diversified ILS portfolio and Stone Ridge’s strategy of investing across the catastrophe bond, ILS and collateralised reinsurance market spectrum.

So, in the last reported quarter New York based Stone Ridge Asset Management, the 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), added approximately around $$318 million of new capital in the three months to the end of April 2016.

That takes the total ILS and reinsurance linked assets managed across the three Stone Ridge funds to $4.76 billion.

The slightly slower growth in the last quarter is likely reflective of the time of year, the availability of new investment opportunities and perhaps the fact that rates have continued to decline, albeit not as rapidly as seen before.

Stone Ridge launched in late 2012 with initial assets of around $350m in two funds, the Stone Ridge Reinsurance Risk Premium Fund and Stone Ridge High Yield Reinsurance Risk Premium Fund.

The managers ILS and reinsurance linked assets 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, a further 4% to $3.86 billion by 31st October 2015 and then leaped 15% to $4.44 billion by the end of January 2016.

Interestingly, the latest portfolio disclosure in Stone Ridge’s quarterly report, covering the three months to the 30th April 2016, shows that not all of the funds grew in the reported period.

The Stone Ridge Reinsurance Risk Premium Interval Fund continues to drive the bulk of the ILS asset growth at Stone Ridge, increasing its total net assets by 10%, from $2.85 billion at the 31st January 2016 to around $3.14 billion at the 30th April 2016, an increase of $290 million.

Meanwhile, the lowest risk mutual ILS fund strategy, the Stone Ridge Reinsurance Risk Premium Fund, grew from $1.08 billion at 31st January 2016 to $1.13 billion at 30th April 2016, a 5% increase.

However, the fund that shrank slightly was the higher risk Stone Ridge High Yield Reinsurance Risk Premium Fund, which saw its total net assets decline slightly from $506.3 million at the 31st January to $494 million at the 30th April 2016.

However, this does appear to be a slight shrinking of this fund rather than due to any impact from catastrophe events, with the volume of investments in the High Yield Reinsurance fund declining slightly during the quarter.

This could be as Stone Ridge shifts some investors across to its Interval ILS fund, as that structure may actually be a preferable way to manage a mutual ILS fund due to the greater certainty in terms of capital availability, as is perhaps evidenced by the rapid growth of the Interval fund.

As ever the Stone Ridge portfolios read like a who’s who of the reinsurance and ILS space, with the manager having stakes in the majority of catastrophe bonds that are outstanding, most of the major collateralised reinsurance sidecar vehicles, as well as a significant number of private ILS transactions, quota shares and segregated cell structured reinsurance deals.

In terms of returns, the Stone Ridge Reinsurance Risk Premium Interval Fund had a total return of 3.3% during the quarter, inclusive of dividends. The Stone Ridge Reinsurance Risk Premium Fund has returned just over 2% year to date and the Stone Ridge High Yield Reinsurance Risk Premium Fund around 2.3% year to date.

Stone Ridge Asset Management continues to show that there is significant appetite from the mutual fund investor community for an ILS and reinsurance linked asset class. As the managers strong growth continues, it looks likely that Stone Ridge will pass the $5 billion mark this year, perhaps already being there thanks to the mid-year June and July renewal season.

With this continued growth, Stone Ridge Asset Management remains the fifth largest manager of ILS and reinsurance assets in our ILS Fund Managers Directory.