Stone Ridge Asset Management, the New York based alternative risk premia focused investment manager, saw insurance-linked securities (ILS) assets under management in its mutual reinsurance fund strategies stay relatively stable at $5.1 billion in the last quarter of record, but there is evidence of more catastrophe bond investments being added to portfolios.
When we last reported on the investment managers 40’s Act compatible mutual cat bond, ILS and reinsurance fund range, further growth in assets had lifted the total to $5.02 billion by the end of October 2024.
Now, one quarter on at January 31st 2025, total for cat bond and ILS assets recorded in the funds has reached just over $5.2 billion.
It’s important to note that there is a cross-investment from one multi-asset class fund strategy into the more cat bond focused fund that Stone Ridge manages, but allowing for that the cat bond and ILS AUM figure in the mutual funds amounted to $5.1 billion at January 31st 2025.
So a relatively stable quarter, in assets under management terms for the Stone Ridge insurance-linked securities focused mutual fund strategies. But with some evidence in the portfolio mix, of allocations to catastrophe bonds growing over that period.
In the last twelve-months, the cat bond, ILS and reinsurance sidecar related assets under management held in Stone Ridge’s mutual reinsurance funds has now increased by roughly 27%, having sat at $4.02 billion at the end of January 2024.
The most catastrophe bond focused of the strategies, the Stone Ridge High Yield Reinsurance Risk Premium Fund, saw its AUM rise slightly from $3.31 billion at the end of October 2023, to now over $3.48 billion at January 31st 2025.
As well as any new investor inflows, coupon earnings will of course have lifted the net asset value of the fund somewhat. However, it’s worth also noting that there will have been some negative valuation effects caused by the wildfires in January, so flows may be larger than we can see.
In fact, we can see that for this Stone Ridge High Yield Reinsurance Risk Premium Fund assets have now grown a little further since the January 31st reporting date, to reach $3.54 billion around the end of March, further raising the total mutual ILS fund AUM.
At January 31st’s $3.48 billion AUM figure, this Stone Ridge cat bond fund strategy has now grown by 37% over the previous twelve months.
There is also evidence of more investments into catastrophe bonds being made, as the share of the fund that is invested into quota share reinsurance instruments has shrunk somewhat, while the event-linked bond component (which is the majority) has grown further over the last quarter of record.
Next, for the Stone Ridge Reinsurance Risk Premium Interval Fund, that invests across the spectrum of ILS and reinsurance-linked assets with a greater focus on sidecars and private quota shares, as well as other collateralized reinsurance arrangements. and to a lesser degree catastrophe bonds, total net assets for this strategy had shrunk slightly in the last quarter of record.
Stone Ridge’s interval ILS strategy had net assets of $1.24 billion by October 31st 2024, but that had fallen to $1.12 billion as of January 31st 2025.
There are some lower valuations evident, which could be due to the effects of the California wildfires in certain cases, it seems. However, this portfolio also contains older positions, some of which are likely to be in run-off at this stage and so values continued to decline slightly in certain cases.
But, also for the Stone Ridge Interval ILS fund, the catastrophe bond component has shrunk slightly, while the quota share reinsurance portion has grown in value. Which is a trend that has been seen through a number of quarters now, as this strategy maintains its focus on the reinsurance segment over cat bonds.
It’s worth noting that the Stone Ridge Reinsurance Risk Premium Interval Fund total net asset value had increased a little further by March this year, to around $1.18 billion, which means the total mutual ILS fund AUM is likely still around or just over the $5.2 billion mark.
Finally, the third mutual fund strategy that Stone Ridge allocates to catastrophe bonds, ILS and reinsurance from, is its Stone Ridge Diversified Alternatives Fund, which is a multi-strategy fund that began adding ILS investments to its portfolio in 2023.
The ILS and reinsurance asset components of this fund grew to almost $530 million at October 31st 2024 and has continued to expand, to reach just over $601 million at January 31st 2025.
However, this is the fund that has a cross-investment, as the Diversified Alternatives fund strategy makes an investment into Stone Ridge’s cat bond focused strategy.
That cross-investment was $66 million at October 31st last year, but has increased to almost $113 million as of January 31st 2025.
Direct catastrophe bond investments remain the largest component and grew further to $386 million, alongside the now $113 million investment into the other cat bond focused Stone Ridge High Yield Reinsurance fund.
Stone Ridge’s Diversified Alternatives fund has continued to grow in size, but so has the ILS related component so it remains relatively flat, in percentage terms, to make up 37% of the strategy at January 31st 2025.
At over $10 billion, Stone Ridge remains one of the largest investment manager of ILS and reinsurance assets, in AUM terms, featured in Artemis’ directory of insurance-linked securities (ILS) fund managers.
