Stone Ridge interval ILS fund up 40% YTD, over 50% since Ian

Investors in mutual insurance-linked securities (ILS) fund strategies operated by Stone Ridge Asset Management, the New York based asset manager with an alternative risk premia focus, will be delighted so far in 2023, as returns accelerate and reach over 40% year-to-date in the Stone Ridge interval ILS fund strategy.

In fact, when you consider the negative or low performing years that this ILS fund had, when it suffered from exposure to multiple major natural catastrophe events that struck the globe from 2017 through 2022, right now it looks like most of that decline has been recovered in a single year.

The Stone Ridge Asset Management Reinsurance Risk Premium Interval Fund invests across the spectrum of ILS and reinsurance-linked assets, with a particular focus on sidecars and private quota shares, other collateralized reinsurance arrangements and to a lesser degree catastrophe bonds.

As a result, the strategy is exposed to major catastrophe insurance market losses worldwide, but it also means the portfolio is now particularly well-positioned to benefit from the greatly improved reinsurance market conditions.

Year-to-date, the strategy has delivered a 40.42% return and over a one-year horizon the return is now approaching 45%.

According to reporting seen by Artemis, the latest one-month return is a significant 5.34%, reflecting the delivery of seasonal premiums to the reinsurance focused investment strategy.

After hurricane Ian, in September 2022, the Stone Ridge Asset Management Reinsurance Risk Premium Interval Fund declined 13.6%. But that hurricane Ian impact was fully recovered by April 2023, since when this interval ILS fund strategy has soared in value.

Right now, the price of this Stone Ridge managed mutual ILS and reinsurance fund stands at its highest level in its history, since launch in late 2013.

Which suggests that investors who stuck with the strategy right the way through the challenging catastrophe loss years, may by now havey earned back all of the declines in the funds price in just the last 12 months.

With hurricane season drawing to a close soon, investors are looking at a really strong year for 2023, which also reflects the returns possible in many other collateralized reinsurance focused investment strategies at this time.

Like the catastrophe bond market, the broader collateralized reinsurance and retrocession funds are also offering their investors record returns in 2023.

Impressively, returns at this level, we know of a number of strategies with returns of 30%+ already this year, should be able to absorb more in the way of loss activity as well than they used to, as they effectively carry less risk for higher reward, thanks to the higher attachments and tighter terms that coverage has been written with this year.

Stone Ridge Asset Management’s largely catastrophe bond focused Stone Ridge High Yield Reinsurance Risk Premium Fund is also having a record year so far, with over 12% returned to the end of October.

With the one-year return sitting at 14.37%, Stone Ridge’s cat bond focused fund strategy will be pleasing its investor base as well, which as we reported has now grown to represent assets of almost $2.11 billion in this fund.

It’s worth comparing the returns of two other mutual ILS fund strategies, such as the Pioneer ILS Interval Fund, managed by Amundi Pioneer, which is typically a less volatile and largely quota share and collateralized reinsurance focused strategy.

The Pioneer ILS Interval Fund is up more than 16% year-to-date, with the strategy now also looking set for a strong and record year.

The City National Rochdale Select Strategies mutual ILS fund, that allocates its capital to ILW focused investments managed by Neuberger Berman’s ILS team, is up more than 10.2% so far, with a record year likely as well (loss activity allowing).

Finally, Amundi Pioneer’s newer Pioneer Cat Bond Fund is up more than 7.4% despite having only launched in May, which is a another strong showing for a shorter period.

Investors will be delighted, as we said, feeling the need to earn back a good amount of their losses.

Looking forward, this kind of performance will start to pique the interest of new investors to the sector and we could begin to see more meaningful growth for the US mutual investment funds focused on ILS, cat bonds and reinsurance, as a result of this strong showing.