Recent Changes to Stone Ridge Funds

Brandon Yee, Research Analyst


In response to an evolving catastrophe bond market, Stone Ridge Asset Management recently closed the Stone Ridge Reinsurance Risk Premium Fund (SREIX) and the Stone Ridge High Yield Reinsurance Risk Premium Fund (SHRIX) to new money. They will merge the two reinsurance funds together on December 5th of this year. The surviving fund will keep the SHRIX symbol and the High Yield Reinsurance Risk Premium fund name. When the funds are merged, SREIX shareholders will receive an equal dollar amount of SHRIX shares. The process is expected to be a tax-free reorganization and does not require any action on your part.

Originally, SREIX invested in a broader part of the catastrophe bond market, while SHRIX only invested in the highest yielding bonds. Over time, yields have slowly compressed due to the lack of severe weather events and an increased issuance of bonds that cover diversifying perils with lower probabilities of occurrence. Additionally, the number of catastrophe bonds outstanding has leveled off, while issuance has noticeably slowed, which also lowers the capacity of the funds. As a result, the portfolios of the two funds began to overlap more and more. In 2013, the percent of bonds qualified for SREIX’s portfolio, and not SHRIX’s portfolio, was 36 percent. In 2015, that number dropped to 16 percent.

As fiduciaries that value great stewards of capital, Versant Capital Management considers Stone Ridge’s actions to be notable. Instead of continuing to accept new money, they decided it was in the best interests of their investors to protect them and fund performance. Determining optimal investment strategy capacity is imperative for any fund manager, and Stone Ridge was proactive in this regard. The merging of the two funds will also serve to create economies of scale that can be passed on to investors.

Changes to investments and strategies naturally occur over time, and we will always adapt accordingly. If you have any questions or concerns regarding these changes, please reach out to us. Versant’s experienced wealth counselors and Chief Investment Officer are always available at your request.


Disclosure: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Versant Capital Management, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Versant Capital Management, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Versant Capital Management, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. If you are a Versant Capital Management, Inc. client, please remember to contact Versant Capital Management, Inc., in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Versant Capital Management, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.