Stone Ridge adds $250m of ILS to diversified alternatives fund. Dedicated ILS fund AUM flat

Stone Ridge Asset Management, the New York based asset manager an alternative risk premia focus, saw its dedicated mutual insurance-linked securities (ILS) fund assets under management (AuM) remain relatively flat in the last quarter of record, but the manager started adding catastrophe bonds and sidecar investments to another alternatives fund.

When we last reported on this, Stone Ridge Asset Management’s mutual ILS fund assets under management (AuM) had risen in the quarter to January 31st 2023.

In fact, that was the first quarter since 2018 where the combined assets of the two flagship mutual ILS funds had increased.

As a result, Stone Ridge Asset Management’s mutual ILS fund assets reached $2.7 billion as of the end of January 2023, up from $2.56 billion a quarter earlier.

At April 30th 2023, one quarter later, the overall mutual ILS fund assets, across the two main dedicated ILS fund strategies that Stone Ridge offers, is reported as $2.63 billion, so practically flat.

In fact, both of the dedicated ILS strategies saw their assets decline slightly in that quarter to April 30th 2023, which is perhaps a little surprising given the strength of the ILS market’s returns and investor appetites as well.

Stone Ridge’s more catastrophe bond focused mutual ILS fund, which is not structured in an interval-style, the Stone Ridge High Yield Reinsurance Risk Premium Fund, saw its assets fall slightly from $1.69 billion at January 31st, to $1.67 billion at April 30th.

Meanwhile, the Stone Ridge Asset Management Reinsurance Risk Premium Interval Fund, that invests across the spectrum of ILS assets with a portfolio including collateralized reinsurance instruments and quota shares, reinsurance sidecar investments and also catastrophe bonds, saw its total net assets fall slightly from $1.01 billion at January 31st, to almost $960 million which is a new low point for this strategy.

Of interest though is the fact Stone Ridge has begun to add catastrophe bonds and collateralized reinsurance sidecar investments to one of its other mutual investment funds over the last six months.

The Stone Ridge Diversified Alternatives Fund had zero catastrophe bonds or ILS assets in its portfolio last October.

But, as of April 30th, this diversified alternative investment fund strategy counted roughly $250 million of ILS market exposure, through allocations directly to almost $175 million of catastrophe bonds, as well as $43.2 million allocated to Stone Ridge’s High Yield Reinsurance Risk Premium Fund and a further $32.3 million allocated to sidecar participation notes.

The $250 million of ILS assets now in this strategy make up almost half the total $545 million size of the diversified alternatives fund, as of April 30th this year.

This further demonstrates how Stone Ridge continues to build-out its use of ILS and reinsurance market returns for its investor base, adding ILS assets to a growing range of alternatives strategies it offers.