UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
811-22761
Investment Company Act file number
Stone Ridge Trust
(Exact name of registrant as specified in charter)
510 Madison Avenue, 21st Floor
New York, NY 10022
(Address of principal executive offices) (Zip code)
Stone Ridge Asset Management LLC
510 Madison Avenue, 21st Floor
New York, NY 10022
(Name and address of agent for service)
(855)-609-3680
Registrant’s telephone number, including area code
Date of fiscal year end: October 31, 2016
Date of reporting period: October 31, 2016
Item 1. Reports to Stockholders.
Annual Report
October 31, 2016
Stone Ridge Reinsurance Risk Premium Fund
Stone Ridge High Yield Reinsurance Risk Premium Fund
Stone Ridge U.S. Large Cap Variance Risk Premium Fund
Stone Ridge U.S. Small Cap Variance Risk Premium Fund
Stone Ridge U.S. Variance Risk Premium Master Fund
Stone Ridge International Developed Markets Variance Risk Premium Fund
Stone Ridge Emerging Markets Variance Risk Premium Fund
Stone Ridge International Variance Risk Premium Master Fund
Stone Ridge Global Equity Variance Risk Premium Master Fund
As Revised
Table of Contents
Shareholder Letter
December 2016
Dear Fellow Shareholder,
I believe we are standing at the front end of a long term shift in how risk is held. Historically, risk has been held by a relatively small group of very large (re)insurers (e.g., hurricane risk), investment banks (e.g., market making risk), and commercial banks (e.g., credit risk). That is, by a tiny number of gigantic balance sheets. In the future, through Stone Ridge and others, I believe these risks will be held directly by individuals – that is, by a gigantic number of tiny balance sheets. Benefitting all. Radically diversifying risk holding may represent the single biggest, one-way force for good that finance will deliver for the world in our lifetimes. Stone Ridge and you, our investors, might even end up leading that shift – a multi-decade journey we can enjoy together.
Pioneering “just in time equity”, Stone Ridge enables our select risk sharing partners in the reinsurance, market making, and alternative lending industries to increasingly say “yes” to their clients while holding less equity, competitively elevating their ROEs, and steadily de-risking the financial system in the process. Over the last four years, through the eyes of these partners, I’ve watched Stone Ridge capital morph from a curiosity item into a competitive advantage. Perhaps, eventually, into a competitive necessity. Evolution happens slowly. Then it happens very, very fast.
As Stone Ridge cooperatively unlocks profitable business lines historically buried within financial institutions, we simultaneously empower our investors to access valuable P&L streams that can diversify traditional portfolios. Working with our risk sharing partners, Stone Ridge has produced $1.4 billion in trading profits since our first funds were fully invested in July 2013. As our partnerships strengthen, the P&L gets better: $96 million in 2013, $252 million in 2014, $386 million in 2015, and $643 million in 2016, with profitability in 93% of months since July 2013 and 13 out of 14 months the S&P 500 was negative.
In 2016, while executing our risk sharing vision, we exhibited more intentionality around how we work. In the process, we strengthened three distinct cultural characteristics that distinguish our firm: work hard, work deep, work gratefully.
WORK HARD
At Stone Ridge, creativity is never a single eureka moment. Each new idea starts small and we try to build it into a big idea, one brick at a time. Most of the time, without success. In recruiting we don’t screen for enthusiasm. We screen for endurance.
Thus, flourishing at our firm requires an enormous capacity for very hard work. The phrase “it’s not how hard you work, it’s how smart you work” doesn’t apply at Stone Ridge. It’s how hard you work.
I’ve never really viewed myself as particularly talented. Where I excel is ridiculous, sickening work ethic. The only thing I see that is distinctly different about me is: I’m not afraid to die on a treadmill. I will not be outworked, period. You might have more talent than me, you might be smarter than me, you might be sexier than me. You might be all of those things. You got it on me in nine categories. But if we get on the treadmill together, there’s two things: You’re getting off first, or I’m going to die. It’s really that simple.
– Will Smith (>$10 billion in global box office sales)
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| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
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On May 9th, revelations about internal violations at Lending Club, and the CEO’s resignation, shook the nascent alternative lending industry to its foundation. At the time of the announcement, Stone Ridge had $1.3 billion of initial investor capital lined up for the imminent launch of LENDX, our alternative lending fund. Because Lending Club was slated to be one of LENDX’s eight important platform relationships at launch, the entire LENDX PM team immediately decided to visit Lending Club in person and re-underwrite their entire organization. In parallel, we arranged calls with every RIA firm investing in LENDX to share our diligence game plan and answer questions. We considered hosting one big, investor group call – far easier and more efficient for us – but ultimately rejected that approach. Instead, 74 separate back-to-back client calls over two days tested our endurance (and vocal cords), but provided our investors with the individual attention they deserve. Our team then flew out to Lending Club’s San Francisco offices to dig in, prepared to walk away from the relationship.
In San Francisco, we insisted on structuring the meetings as “one executive at a time” including, separately, the 1) Chairman, 2) CEO, 3) Head of Audit/CCO, 4) General Counsel, 5) CFO, 6) CIO, and 7) Head of Credit. Each of those sessions was intense and our overall process was appropriately invasive. In the end, we came away more impressed, not less, with Lending Club’s culture of compliance, controls, and operational excellence.
We followed up our trip by calling those same 74 investors to review our diligence findings in detail. On those calls, we also shared that, based in part on what we learned in diligence, Stone Ridge would be doubling its own investment in LENDX. We then proceeded to buy $955 million of Lending Club loans between June and late-December.
Today, the folks at Lending Club are back on their feet and thriving. We are proud to have played a part, especially during their darkest hour. And, since its inception June 1, LENDX is up materially at a time when traditional fixed income and muni exposure – what LENDX replaced in our investors’ portfolios – destroyed wealth.1
The turn of events at Lending Club tested whether or not we were willing to die on a treadmill. We were. Our team proved its burst capacity for very hard work, gave LENDX life, and, in seven short months, enabled 130,000 loan recipients to bet on themselves – the most American of all traits – propelling our economy forward.
WORK DEEP
Hard work is a necessary, but not sufficient condition for successful productivity at Stone Ridge. Focus, a core principle of our firm, is equally critical. Now in our fifth year, we’ve only done three things: reinsurance, variance risk premium, and alternative lending. That pace feels good to me. Innovative breakthroughs – never guaranteed – require intense concentration without distraction for long periods of time. Simplicity helps. So does saying no to virtually all new opportunities.
In Deep Work, the brilliant Cal Newport contrasts Shallow Work and Deep Work:
Shallow Work: non-cognitively demanding, logistical style tasks, often performed while distracted. These efforts tend to not create much new value in the world and are easy to replicate.
Deep Work: professional activities performed in a state of distraction-free concentration that push your cognitive capabilities to their limit. These efforts create new value, improve your skill, and are hard to replicate.
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| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
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Popular culture is shifting shallow. Social media, 500 TV channels, ceaseless FOMO. Work culture is also shifting shallow. IM, Slack, email, the incessant “need” to always be connected, responding to irrelevancies within seconds. However, the shift shallow creates opportunity for those willing to resist and train in depth.
We train in depth at Stone Ridge. I wake up every day between 4am and 5am to be in quiet, pursuing mastery of professional tasks I love. I’m not on social media – no Facebook, no Instagram, no LinkedIn. I don’t use voicemail and my sporadic use of email comes at the cost of occasionally missing important messages that roll off the screen. But the reward is more time in a flow state, cultivating craftsmanship, teetering on creativity.
Deep Work requires bravery. There’s an uneasiness that surrounds any effort to produce the best you’re capable of producing – what if it’s not good enough? In 2015, on the back of early morning Deep Work sessions, we introduced the concept of Antifragile at Stone Ridge and, in 2016, we built upon it. Coined by Nassim Taleb, something Antifragile goes beyond resiliency, which means surviving shocks. For something Antifragile, shocks actually make it stronger. Firms are fragile. Could Stone Ridge become Antifragile? For our reinsurance franchise, the solution is SRPEX.
In 2016, the Stone Ridge Post-Event Reinsurance Fund (SRPEX) went from concept to reality. SRPEX activates and takes in client assets only after industry-changing disasters, the same kind of “CNN events” that will cause our Reinsurance Funds to have material drawdowns. Historically, such industry-changing events (e.g., devastating hurricanes Dennis, Emily, Katrina, Rita, and Wilma occurred during four consecutive months in 2005) have caused post-event reinsurance yields to increase considerably the following renewal season. Upon triggering, SRPEX will be the sole channel to access the Stone Ridge Reinsurance Funds. SRPEX, available only to existing clients at the time of its activation, does not charge additional management fees or expenses.2
How can a fund with no assets, charging no fees, help a firm, its clients, and its reinsurance partners become Antifragile? For clients, SRPEX means access to valuable post-event capacity with the largest global reinsurers, so long-term wealth creation becomes Antifragile. For our reinsurance partners, SRPEX means balance sheet security and the ability to play post-event offense, so their capital structure becomes Antifragile. For Stone Ridge, SRPEX means post-event AUM goes up, not down, so our firm becomes Antifragile. Working deep, Stone Ridge conceived of and created SRPEX, which currently has $2 billion of investor capital lined up, waiting for the opportunity.
WORK GRATEFULLY
Gratitude has been a foundational element of Stone Ridge since its inception, but this year it soaked even deeper into the cracks of the organization. My personal philosophy on gratitude mirrors my philosophy on sweeping the floor. Just because I’ve done it once, doesn’t mean my floor is clean forever. Every day the dust comes back and every day I must sweep. Every day we must be grateful.
Practicing gratitude – really, actually practicing it – helps keep our feet on the ground in the face of accelerating business success. Everyone experiences failures and adversity. We’re all subject to the rules of gravity and averages. However, our team doesn’t let externals determine value. It’s on us. We let the satisfaction of doing great work be enough, period.
The reality is that lack of gratitude – ego – is the enemy of what we want and what we have. Of mastering a craft. Of real creative insight. Of working well with others. Of building loyalty and support. Of repeating and retaining success. Ego repulses advantages and opportunities. It’s a magnet for enemies and errors.
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| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
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Gratitude and sobriety – staying in command of ourselves – is the counterweight that can balance success. Especially as things keep getting better. It requires a strong constitution to withstand repeated attacks of prosperity and not change. At Stone Ridge, one of our best defenses is staying radically private. We fight the impulse to seek recognition because talking and doing compete for the same resources. We’ve had a “no press policy” since the firm’s founding, which I consider a sustainable business advantage. Unpretentiousness will remain a cornerstone of our culture. If we want to live happy, let’s live hidden. We can simply be grateful in private.
HEALTH WARNING: WHAT WE DO IS VERY RISKY
2016 was far from a smooth ride and, given the diversity of our risk exposures, no year ever will be. Our reinsurance portfolios took many hits in 2016, including the Fort McMurray wildfires, Hurricane Matthew, and a magnitude 7.8 earthquake in New Zealand. Our Variance Risk Premium (VRP) franchise suffered from three material volatility spikes due to the worst first six calendar weeks for US equity markets in history, Brexit, and the US election. Yet across all products, Stone Ridge delivered ten positive months and $643 million of trading profits in 2016.
Since inception, 44 of our 47 months have been profitable. That’s absolutely unsustainable. Our performance since inception materially understates the true risk of our strategies. In particular, historical volatility is an often misleading and always incomplete measure of risk for any strategy, but especially for those involving insurance-related investments. Do not get lulled into a false sense of security when looking at the consistency of our past results. In future years, there will be tragic earthquakes and hurricanes. There will be market crashes and credit crises. Our risk management goal is to have a very bad quarter or year, not a bad decade.
Stone Ridge is most proud of the 50/50 partnership we have with you, our clients. We are on the path together. You contribute the capital necessary to sustain and propel groundbreaking product development. We contribute our collective careers’ worth of experience in sourcing, structuring, execution, and risk management. Together it works. In that spirit, I offer my deepest gratitude to you for sharing responsibility for your wealth with us this year. We look forward to serving you again in 2017.
Sincerely,
Ross L. Stevens
Founder, CEO
| 1. | Traditional Fixed Income is referring to Barclays US Aggregate Index, which is a broad-based benchmark measuring investment grade USD denominated fixed-rate taxable bond market. This is widely recognized to be a key fixed income benchmark. Muni exposure is referring to Bloomberg Barclays US Municipal Bonds index, which tracks USD denominated long-term tax exempt bond market. It is not possible to invest in an index. |
| | In the time period referenced (June 1 – December 27, 2016), the Barclays US Aggregate index returned -2.64% and the Barclays US Municipal Bond index returned -4.66%. The LENDX return during the period of this report (inception on June 1, 2016 to October 31, 2016) is 7.25%. |
| | There are a number of differences between LENDX, on the one hand, and the Barclays US Aggregate and Barclays US Municipal Bond indices, on the other hand. LENDX invests in alternative lending securities, while the Barclays US Aggregate index is focused on investment grade Treasuries, government and corporate bonds, and Mortgage/Asset/or Commercial Mortgage backed securities, and the Barclays US Municipal Bond index is focused only on municipal bonds. The risks and liquidity of the different assets are different. For example, alternative lending securities may be impacted more by macroeconomic conditions, whereas government and corporate bonds may be impacted more by the financial condition of the specific borrower. Alternative lending securities may be less liquid than the debt securities tracked by the Barclays US Aggregate and Barclays US Municipal Bond indices. The tax treatment may also be different among the different securities. LENDX has 3.78% gross expense ratio while the indices are not investable and do not have fees or expenses. LENDX is an interval fund and has quarterly liquidity. |
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| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
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| 2. | The Adviser has agreed to permanently waive all management fees payable by the Fund that are attributable to assets of the Fund invested in SRRIX. In addition, at least through the one-year anniversary of the date the Fund commences investment operations, the Adviser has agreed to pay or otherwise bear operating and other expenses of the Fund (excluding brokerage and transactional expenses; borrowing and other investment-related costs and fees including interest and commitment fees; short dividend expense; acquired fund fees and expenses (including all fees and expenses of the Reinsurance Interval Fund); taxes; litigation and indemnification expenses; judgments; and extraordinary expenses not incurred in the ordinary course of the Fund’s business) solely to the extent necessary to limit the total annualized amount of such expenses to 0.00% of the average daily net assets of the Fund. The total expense ratio of SRPEX is therefore expected to simply be the expense ratio of SRRIX. |
Standardized returns as of most recent quarter-end (12/31/16): for Stone Ridge Alternative Lending Risk Premium Fund (LENDX) since inception (6/1/16)=8.58%; for Stone Ridge All Asset Variance Risk Premium Fund (AVRPX) 1Yr=7.64%; since inception (4/13/15)=7.37%; for Stone Ridge Reinsurance Risk Premium Interval Fund (SRRIX) 1Yr=6.38%; since inception (12/9/13)=8.20%; for Stone Ridge Reinsurance Risk Premium Fund (SREIX) 1Yr=6.93%; since inception (2/1/13)=6.31% (SREIX was reorganized with and into SHRIX effective 12/5/16); for Stone Ridge High Yield Reinsurance Risk Premium Fund (SHRIX) 1Yr=6.73%; since inception (2/1/13)=7.00%; for Barclays US Aggregate 1Yr=2.65%, 5Yr=2.23%, 10Yr=4.34%; for Bloomberg Barclays US Municipal Bond Index 1Yr=0.25% 5Yr=3.28%, 10Yr=4.24%; for S&P500 1Yr=11.95%, 5Yr=14.63%, 10Yr=6.94%; for Stone Ridge U.S. Large Cap Variance Risk Premium Fund (VRLIX) 1Yr=6.81%, since inception (5/1/13)=7.55%; for Stone Ridge U.S. Small Cap Variance Risk Premium Fund (VRSIX) 1Yr=6.90%, since inception (5/1/13)=6.37%; for Stone Ridge International Developed Markets Variance Risk Premium Fund (VRFIX) 1Yr=3.79%, since inception (2/11/14)=2.22%; for Stone Ridge Emerging Markets Variance Risk Premium Fund (VRMIX) 1Yr=2.57%, since inception (2/11/14)=-2.87%; for Stone Ridge US Variance Risk Premium Master Fund (VRPIX) 1Yr=6.66%, since inception (5/22/13)=6.73%; for Stone Ridge International Variance Risk Premium Master Fund (VRIIX) 1Yr=3.10%, since inception (2/11/14)=0.18%; for Stone Ridge Global Equity Variance Risk Premium Fund (VRGIX) 1yr=4.91%, since inception (11/14/14)=2.22%. Returns reflect the reinvestment of dividends and other earnings. Fund returns are net of management fees and other expenses and are annualized, except where performance is shown for a period of one year or less. Indices are not investable and do not reflect any fees or transaction costs. As a result of economic incentives received from platforms that may not be repeated, performance for LENDX was unusually strong for the period shown and should not be extrapolated to future months.
Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end for all the Funds may be obtained by calling 855-609-3860. Short-term performance, in particular, is not a good indication of the Fund’s future performance, and an investment should not be made based solely on returns. Performance reflects management fees and other Fund expenses.
LENDX, AVRPX, SRRIX, and SPREX are closed-end interval funds. The rest of the funds are open-end funds.
Gross expense ratios as stated in the relevant prospectus: SRRIX 2.42%, SREIX 1.65%, SHRIX 1.69%, AVRPX 2.73%, VRLIX 1.54%, VRSIX 1.56%, VRFIX 1.94%, VRMIX 2.09%, VRPIX 1.67%, VRIIX 2.44%, VRGIX 2.22%, LENDX 3.78%. Please see the financial highlights section of each Fund’s shareholder report for more recent expense ratios.
The Stone Ridge Funds consist of the Stone Ridge Reinsurance Risk Premium Fund (the “Reinsurance Fund”), the Stone Ridge High Yield Reinsurance Risk Premium Fund (the “High Yield Reinsurance Fund”), the Stone Ridge Post-Event Reinsurance Fund (the “Post-Event Fund”), the Stone Ridge Reinsurance Risk Premium Interval Fund (the “Reinsurance Interval Fund” and, together with the Reinsurance Fund, the High Yield Reinsurance Fund, and the Post-Event Fund
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| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
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the “Reinsurance Funds”), the Stone Ridge U.S. Large Cap Variance Risk Premium Fund (the “U.S. Large Cap VRP Fund”), the Stone Ridge U.S. Small Cap Variance Risk Premium Fund (the “U.S. Small Cap VRP Fund”), the Stone Ridge U.S. Variance Risk Premium Master Fund (the “U.S. VRP Master Fund” and, together with the U.S. Large Cap VRP Fund and the U.S. Small Cap VRP Fund, the “U.S. VRP Funds”), the Stone Ridge International Developed Markets Variance Risk Premium Fund (the “Developed Markets VRP Fund”), the Stone Ridge Emerging Markets Variance Risk Premium Fund (the “Emerging Markets VRP Fund”), the Stone Ridge International Variance Risk Premium Master Fund (the “International VRP Master Fund”), the Stone Ridge Global Equity Variance Risk Premium Master Fund (the “Global VRP Master Fund” and, together with the Developed Markets VRP Fund, the Emerging Markets VRP Fund, and the International VRP Master Fund, the “International VRP Funds”), the Stone Ridge All Asset Variance Risk Premium Fund (the “AVRPX Fund” and, together with the U.S. VRP Funds and the International VRP Funds, the “VRP Funds”) and the Stone Ridge Alternative Lending Risk Premium Fund (the “Alternative Lending Fund” and, together with the Reinsurance Funds and the VRP Funds, the “Funds”).
The Funds are sold to (i) institutional investors, including registered investment advisers (“RIAs”), that meet certain qualifications and have completed an educational program provided by Stone Ridge Asset Management LLC (the “Adviser”); (ii) clients of such institutional investors; and (iii) certain other eligible investors (as described in the relevant prospectus). Investors should carefully consider the Funds’ risks and investment objectives, as an investment in the Funds may not be appropriate for all investors and the Funds are not designed to be a complete investment program. There can be no assurance that the Funds will achieve their investment objectives. An investment in the Funds involves a high degree of risk. It is possible that investing in a Fund may result in a loss of some or all of the amount invested. Before making an investment/allocation decision, investors should (i) consider the suitability of this investment with respect to an investor’s or a client’s investment objectives and individual situation and (ii) consider factors such as an investor’s or a client’s net worth, income, age and risk tolerance. Investment should be avoided where an investor/client has a short-term investing horizon and/or cannot bear the loss of some or all of the investment. Before investing in a Fund, an investor should read the discussion of the risks of investing in the Fund in the relevant prospectus.
Holdings and sector allocations are subject to change and are not a recommendation to buy or sell any security.
Investing in funds involves risks, as does all investing. Principal loss is possible.
Derivatives are financial contracts the value of which depends on, or is derived from, the underlying security or other reference asset. Derivatives involve the risk that changes in their value may not move as expected relative to changes in the value of the underlying reference they are designed to track. A Fund may invest in derivatives to generate income from premiums, for investment purposes and for hedging and risk management purposes. Derivatives risk may be more significant when derivatives are used to enhance return or as a substitute for a cash investment option, rather than solely to hedge the risk of a position held by a Fund. A Fund’s use of derivatives as part of its principal investment strategy to sell protection against the volatility of various underlying investments involves the risk that, if the volatility of the underlying investments is greater than expected, the Fund will bear losses to the extent of its obligations under the relevant derivative contracts, which may not be outweighed by the amount of any premiums received for the sale of such derivative instruments. The use of derivatives involves risks that are in addition to, and potentially greater than, the risks of investing directly in securities and other more traditional assets. Derivatives also present other risks, including market risk, illiquidity risk, currency risk, and credit risk. A decision as to whether, when and how to use options involves the
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| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
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Shareholder Letter
exercise of skill and judgment, and even a well-conceived and well-executed options program may be adversely affected by market behavior or unexpected events.
The use of derivatives can lead to losses because of adverse movements in the price or value of the reference instrument, due to failure of a counterparty or due to tax or regulatory constraints. Derivatives may create economic leverage in a Fund, which magnifies the Fund’s exposure to the reference instrument and magnifies potential losses. When derivatives are used to gain or limit exposure to a particular market or market segment, their performance may not correlate as expected to the performance of such market, thereby causing a Fund to fail to achieve its original purpose for using such derivatives. A decision as to whether, when and how to use derivatives involves the exercise of specialized skill and judgment, and a transaction may be unsuccessful in whole or in part because of market behavior, unexpected events or the Adviser’s failure to use derivatives effectively. Derivative instruments may be difficult to value, may be illiquid and may be subject to wide swings in valuation caused by changes in the value of the reference instrument.
Successful options strategies may require the anticipation of future movements in securities prices or other economic factors of the underlying investments. No assurances can be given that the Adviser’s judgment in this respect will be correct. When a call option is exercised, potential losses on written covered call options can be equal to the appreciation of the underlying security in excess of the option exercise price. When a put option is exercised, a Fund may be required to take delivery of an underlying instrument that it does not want to have in its portfolio, while paying a price for that security in excess of its current market price, or to make a cash payment equal to any depreciation in the value of the underlying instrument below the strike price of the put option. Accordingly, the potential losses from writing options can be substantial.
The value of equity instruments to which a Fund is exposed may fall due to general market or economic conditions; overall market changes; local, regional or global political, social or economic instability; currency, interest rate and commodity price fluctuations; perceptions regarding the industries in which the issuers participate, and the particular circumstances and performance of the issuers. Market conditions may affect certain types of equity securities to a greater extent than other types. The equity securities of smaller, less seasoned companies are generally subject to greater price fluctuations, limited liquidity, higher transaction costs and higher investment risk. Smaller companies may have limited product lines, markets or financial resources, may be dependent on a limited management group, and may lack substantial capital reserves or an established performance record. There may be generally less publicly available information about such companies than for larger, more established companies.
The equity securities of large-capitalization companies can perform differently from other segments of the equity market or the equity market as a whole. Companies with large capitalization tend to go in and out of favor based on market and economic conditions and, while they can be less volatile than companies with smaller market capitalizations, they may also be less flexible in evolving markets or unable to implement change as quickly as their smaller counterparts. Accordingly the value of equity securities issued by large-capitalization companies may not rise to the same extent as the value of equity securities issued by small or mid-cap companies under certain market conditions or during certain periods.
Direct or indirect investments in securities of foreign issuers involve risks not ordinarily associated with exposure to securities and instruments of U.S. issuers, including differences in accounting, auditing and financial standards; less government supervision and regulation; currency risk; risks of expropriation, confiscatory taxation, political or social instability or diplomatic developments;
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| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
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Shareholder Letter
less publicly available information; less volume in foreign markets; increased costs of transacting in foreign markets. These risks are heightened in emerging markets.
Event-linked bonds, catastrophe bonds and other reinsurance-related securities carry large uncertainties and major risk exposures to adverse conditions. If a trigger event, as defined within the terms of the bond, involves losses or other metrics exceeding a specific magnitude in the geographic region and time period specified therein, a Fund may lose a portion or all of its investment in such security, including accrued interest and/or principal invested in such security. Such losses may be substantial. The reinsurance-related securities in which the Funds invest are considered “high yield” or “junk bonds.”
The reinsurance industry relies on risk modeling to analyze potential risks in a single transaction and in a portfolio of transactions. The industry uses the models of two independent risk modeling firms, RMS and AIR. Some firms may use their own internal, proprietary risk models in addition to RMS and AIR models. The models are based on probabilistic simulations that generate thousands or millions of potential events based on historical data, scientific and meteorological principles and extensive data on current insured properties. Every cat bond and quota share trade comes with a set of risk analytics and statistics. Cat bonds are all modeled by either RMS or AIR and the full set of risk statistics are provided in the offering circular. Quota shares are all modeled by RMS, AIR and/or the sponsor, and all the risk statistics are also provided.
Expected loss refers to the estimated annual loss as a percentage of the principal. This is calculated by the risk modeling firms using the results of thousands or millions of simulations. Median loss is a related term that refers to the estimated median loss in the thousands or millions of simulations that the risk modeling firms run for an asset or portfolio.
The value of the Alternative Lending Fund’s investments in whole loans and other alternative lending-related securities, such as shares, certificates, notes or other securities representing an interest in and the right to receive principal and interest payments due on whole loans or fractions of whole loans, is entirely dependent on the borrowers’ continued and timely payments. If a borrower is unable or fails to make payments on a loan for any reason, the Alternative Lending Fund may be greatly limited in its ability to recover any outstanding principal or interest due, as (among other reasons) the Alternative Lending Fund may not have direct recourse against the borrower or may otherwise be limited in its ability to directly enforce its rights under the loan, whether through the borrower or the platform through which such loan was originated, the loan may be unsecured or under-collateralized and/or it may be impracticable to commence a legal proceeding against the defaulting borrower. If the Alternative Lending Fund were unable to recover unpaid principal or interest due, this would cause the Alternative Lending Fund’s net asset value to decrease. Many of the Alternative Lending Fund’s investments are associated with loans that are unsecured obligations of borrowers. This means that they are not secured by any collateral, not insured by any third party, not backed by any governmental authority in any way and, except in the case of certain loans to businesses, not guaranteed by any third party. The Alternative Lending Fund generally will need to rely on the efforts of the platforms, servicers or their designated collection agencies to collect on defaulted loans and there is no guarantee that such parties will be successful in their efforts to collect on loans. Even if a loan in which the Alternative Lending Fund has investment exposure is secured, there can be no assurance that the collateral will, when recovered and liquidated, generate sufficient (or any) funds to offset any losses associated with the defaulting loan. It is possible that the same collateral could secure multiple loans, in which case the liquidation proceeds of the collateral may be insufficient to cover the payments due on all the loans secured by that collateral. The Alternative Lending Fund may have limited knowledge about the underlying loans and will be dependent upon the platform for information regarding underlying
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| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
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9
Shareholder Letter
loans. Although the Alternative Lending Fund conducts diligence on the platforms, the Fund generally does not have the ability to independently verify the information provided by the platforms, other than payment information regarding loans and other alternative lending-related securities owned by the Alternative Lending Fund, which the Fund will observe directly as payments are received. Platforms may not have an obligation to update borrower information, and, therefore, the Fund may not be aware of any impairment in a borrower’s creditworthiness subsequent to the making of a particular loan. Although the Alternative Lending Fund conducts diligence on the credit scoring methodology used by platforms from which the Fund purchases alternative lending-related securities, the Fund typically will not have access to all of the data that platforms utilize to assign credit scores to particular loans purchased directly or indirectly by the Fund, and will not independently diligence or confirm the truthfulness of such information or otherwise evaluate the basis for the platform’s credit score of those loans. The default history for alternative lending borrowing arrangements is limited and future defaults may be higher than historical defaults.
In general, the value of a debt security is likely to fall as interest rates rise. Below-investment grade securities, which are often referred to as “junk,” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. They may also be difficult to value and illiquid. The Alternative Lending Fund’s investments in securitization vehicles or other special purpose entities that hold alternative lending-related securities (asset-backed securities) may involve risks that differ from or are greater than risks associated with other types of investments.
The Alternative Lending Fund may invest directly or indirectly in the alternative lending-related securities of foreign issuers. Such investments may involve risks not ordinarily associated with exposure to alternative lending-related securities of U.S. issuers. The foreign alternative lending industry may be subject to less governmental supervision and regulation than exists in the U.S.; conversely, foreign regulatory regimes applicable to the alternative lending industry may be more complex and more restrictive than those in the U.S., resulting in higher costs associated with such investments, and such regulatory regimes may be subject to interpretation or change without prior notice to investors, such as the Alternative Lending Fund. Foreign platforms may not be subject to accounting, auditing, and financial reporting standards and practices comparable to those in the U.S. Due to difference in legal systems, there may be difficulty in obtaining or enforcing a court judgment outside the U.S. For example, bankruptcy laws may differ across the jurisdictions in which the Fund may invest and it may be difficult for the servicer to pursue borrowers who borrow through non-U.S. platforms. In addition, to the extent that investments are made in a limited number of countries, events in those countries will have a more significant impact on the Alternative Lending Fund. The Alternative Lending Fund’s investments in foreign securities may be subject to risks of increased transaction costs, potential delays in settlement or unfavorable differences between the U.S. economy and foreign economies. The Alternative Lending Fund’s exposure to alternative lending-related securities issued by foreign issuers may be subject to withholding and other foreign taxes, which may adversely affect the net return on such investments. As described further under “Currency Risk,” fluctuations in foreign currency exchange rates and exchange controls may adversely affect the market value of the Alternative Lending Fund’s investments in alternative lending-related securities of foreign issuers. The Alternative Lending Fund is unlikely to be able to pass through to its shareholders foreign income tax credits in respect of any foreign income taxes it pays.
Some Funds may obtain financing to make investments and may obtain leverage through derivative instruments or asset-backed securities that afford the Fund economic leverage. Therefore, such Funds are subject to leverage risk. Leverage magnifies a Fund’s exposure to declines in the value
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
10
Shareholder Letter
of one or more underlying investments or creates investment risk with respect to a larger pool of assets than the Fund would otherwise have and may be considered a speculative technique. The value of an investment in a Fund will be more volatile and other risks tend to be compounded if and to the extent the Fund borrows or uses derivatives or other investments that have embedded leverage. Engaging in such transactions may cause a Fund to liquidate positions when it may not be advantageous to do so to satisfy its obligations or to meet segregation requirements.
The Funds may invest in illiquid or restricted securities, which may be difficult or impossible to sell at a time that a Fund would like or at the price that a Fund believes the security is currently worth.
Each Fund intends to qualify for treatment as a regulated investment company (“RIC”) under the Internal Revenue Code. In order to qualify for such treatment, a Fund must derive at least 90% of its gross income each taxable year from qualifying income, meet certain asset diversification tests at the end of each fiscal quarter, and distribute at least 90% of its investment company taxable income. A Fund’s investment strategy will potentially be limited by its intention to qualify for treatment as a RIC. The tax treatment of certain of the Funds’ investments under one or more of the qualification or distribution tests applicable to RICs is not certain. An adverse determination or future guidance by the IRS might affect a Fund’s ability to qualify for such treatment.
If, in any year, a Fund were to fail to qualify for treatment as a RIC under the Internal Revenue Code for any reason, and were unable to cure such failure, the Fund would be subject to tax on its taxable income at corporate rates, and all distributions from earnings and profits, including any distributions of net tax-exempt income and net long-term capital gains, would be taxable to shareholders as ordinary income.
For additional risks, please refer to the prospectus.
The Reinsurance Funds, the International VRP Funds, the AVRPX Fund and the Alternative Lending Fund are classified as non-diversified under the 1940 Act. Accordingly, these Funds may invest a greater portion of their assets in the securities of a single issuer than if they were “diversified” funds. To the extent that these Funds invest a higher percentage of their assets in the securities of a single issuer, they are subject to a higher degree of risk associated with and developments affecting that issuer than a fund that invests more widely.
The AVRPX Fund and the Alternative Lending Fund each has a limited history of operations and is designed for long-term investors and not as a short-term trading vehicle.
The Post-Event Fund is a newly organized closed-end management investment company with no history of operations and is designed for long-term investors and not as a short-term trading vehicle. The Reinsurance Interval Fund has a limited history of operations and commenced investment operations on December 9, 2013.
Diversification does not assure a profit or protect against a loss in a declining market.
The Reinsurance Interval Fund, the AVRPX Fund, the Alternative Lending Fund and the Post-Event Fund have an interval fund structure pursuant to which each Fund, subject to applicable law, conducts quarterly repurchase offers of the Fund’s outstanding shares at net asset value (“NAV”), subject to approval of the Board of Trustees. In all cases, such repurchases will be for at least 5% and not more than 25% of the relevant Fund’s outstanding shares. Repurchase offers are currently
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
11
Shareholder Letter
expected to be 5% for the Reinsurance Interval Fund, the Alternative Lending Fund and the Post-Event Fund and 10% for the AVRPX Fund. In connection with any given repurchase offer, it is possible that a Fund may offer to repurchase only the minimum amount of 5% of its outstanding shares. It is possible that a repurchase offer may be oversubscribed, with the result that shareholders may only be able to have a portion of their shares repurchased. There is no assurance that you will be able to tender your Shares when or in the amount that you desire. The Funds’ shares are not listed and the Funds do not currently intend to list their shares for trading on any national securities exchange. There is not expected to be any secondary trading market in these shares. The shares are, therefore, not marketable. Even though the Funds will make quarterly repurchase offers to repurchase a portion of the shares to try to provide liquidity to shareholders, you should consider the shares to be illiquid.
The information provided herein should not be construed in any way as tax, capital, accounting, legal or regulatory advice. Investors should seek independent legal and financial advice, including advice as to tax consequences, before making any investment decision.
Opinions expressed are subject to change at any time, and are not guaranteed and should not be considered investment advice.
Return on equity (ROE): A measure of a corporation’s profitability. Represents average return on equity on the securities in the portfolio, not the actual return on equity on the portfolio.
P&L: stands for “profit and loss”
RIA: stands for “Registered Investment Adviser”
AUM: stands for “Assets Under Management”
FOMO: stands for “Fear of Missing Out”
IM: stands for “instant messaging”
The S&P 500 Index is a broad based unmanaged index of 500 stocks, which is widely recognized as representative of the equity market in general. It is not possible to invest in an index.
The “Work Gratefully” section is inspired by Ego is the Enemy, by Ryan Holiday, select phrases used with permission of the author.
This information is intended for the shareholders of the Funds and is not for distribution to prospective investors unless preceded or accompanied by a current prospectus.
The Funds’ investment objectives, risks, charges and expenses must be considered carefully before investing. The relevant prospectus contains this and other important information about the investment company, and it may be obtained by calling 855-609-3860. Read it carefully before investing. You can obtain the Funds’ most recent periodic reports and certain other regulatory filings by calling 855-609-3860 or visiting www.stoneridgefunds.com.
The Stone Ridge Funds are distributed by Quasar Distributors, LLC.
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
12
| | | | |
| STONE RIDGE REINSURANCE RISK PREMIUM FUND | | | | |
|
| PERFORMANCE DATA (Unaudited) |
This chart assumes an initial gross investment of $25,000,000 made on February 1, 2013 (commencement of operations). Returns shown include the reinvestment of all dividends. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. In the absence of fee waivers and reimbursements, total return would be reduced. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than the original cost.
The Bank of America (BofA) Merrill Lynch 3-Month U.S. Treasury Bill Index is an index of short-term U.S. Government securities with a remaining term to final maturity of less than three months. Index figures do not reflect any deduction of fees, taxes or expenses, and are not available for investment.
| | | | | | | | |
| AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED OCTOBER 31, 2016) | | | | |
| | | 1-year
period
ended
10/31/2016 | | | Since
Inception
(02/01/13) | |
Stone Ridge Reinsurance Risk Premium Fund — Class I | | | 6.46% | | | | 6.30% | |
Stone Ridge Reinsurance Risk Premium Fund — Class M | | | 6.34% | | | | 6.15% | |
BofA Merrill Lynch 3-Month U.S. Treasury Bill Index | | | 0.31% | | | | 0.11% | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
13
| | | | |
| STONE RIDGE HIGH YIELD REINSURANCE RISK PREMIUM FUND | | | | |
|
| PERFORMANCE DATA (Unaudited) |
This chart assumes an initial gross investment of $25,000,000 made on February 1, 2013 (commencement of operations). Returns shown include the reinvestment of all dividends. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. In the absence of fee waivers and reimbursements, total return would be reduced. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than the original cost.
The Bank of America (BofA) Merrill Lynch 3-Month U.S. Treasury Bill Index is an index of short-term U.S. Government securities with a remaining term to final maturity of less than three months. Index figures do not reflect any deduction of fees, taxes or expenses, and are not available for investment.
| | | | | | | | |
| AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED OCTOBER 31, 2016) | | | | |
| | | 1-year
period
ended
10/31/2016 | | | Since
Inception
(02/01/13) | |
Stone Ridge High Yield Reinsurance Risk Premium Fund — Class I | | | 6.82% | | | | 7.18% | |
Stone Ridge High Yield Reinsurance Risk Premium Fund — Class M | | | 6.60% | | | | 7.01% | |
BofA Merrill Lynch 3-Month U.S. Treasury Bill Index | | | 0.31% | | | | 0.11% | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
14
| | | | |
| STONE RIDGE U.S. LARGE CAP VARIANCE RISK PREMIUM FUND | | | | |
|
| PERFORMANCE DATA (Unaudited) |
This chart assumes an initial gross investment of $25,000,000 made on May 1, 2013 (commencement of operations). Returns shown include the reinvestment of all dividends. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. In the absence of fee waivers and reimbursements, total return would be reduced. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than the original cost.
The Bank of America (BofA) Merrill Lynch 3-Month U.S. Treasury Bill Index is an index of short-term U.S. Government securities with a remaining term to final maturity of less than three months. Index figures do not reflect any deduction of fees, taxes or expenses, and are not available for investment.
| | | | | | | | |
| AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED OCTOBER 31, 2016) | | | | |
| | | 1-year
period
ended
10/31/2016 | | | Since
Inception
(05/01/13) | |
Stone Ridge U.S. Large Cap Variance Risk Premium Fund — Class I | | | 2.75% | | | | 6.96% | |
Stone Ridge U.S. Large Cap Variance Risk Premium Fund — Class M | | | 2.67% | | | | 6.80% | |
BofA Merrill Lynch 3-Month U.S. Treasury Bill Index | | | 0.31% | | | | 0.11% | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
15
| | | | |
| STONE RIDGE U.S. SMALL CAP VARIANCE RISK PREMIUM FUND | | | | |
|
| PERFORMANCE DATA (Unaudited) |
This chart assumes an initial gross investment of $25,000,000 made on May 1, 2013 (commencement of operations). Returns shown include the reinvestment of all dividends. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. In the absence of fee waivers and reimbursements, total return would be reduced. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than the original cost.
The Bank of America (BofA) Merrill Lynch 3-Month U.S. Treasury Bill Index is an index of short-term U.S. Government securities with a remaining term to final maturity of less than three months. Index figures do not reflect any deduction of fees, taxes or expenses, and are not available for investment.
| | | | | | | | |
| AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED OCTOBER 31, 2016) | | | | |
| | | 1-year
period
ended
10/31/2016 | | | Since
Inception
(05/01/13) | |
Stone Ridge U.S. Small Cap Variance Risk Premium Fund — Class I | | | 0.31% | | | | 4.94% | |
Stone Ridge U.S. Small Cap Variance Risk Premium Fund — Class M | | | 0.11% | | | | 4.77% | |
BofA Merrill Lynch 3-Month U.S. Treasury Bill Index | | | 0.31% | | | | 0.11% | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
16
| | | | |
| STONE RIDGE U.S. VARIANCE RISK PREMIUM MASTER FUND | | | | |
|
| PERFORMANCE DATA (Unaudited) |
This chart assumes an initial gross investment of $25,000,000 made on May 22, 2013 (commencement of operations). Returns shown include the reinvestment of all dividends. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than the original cost.
The Bank of America (BofA) Merrill Lynch 3-Month U.S. Treasury Bill Index is an index of short-term U.S. Government securities with a remaining term to final maturity of less than three months. Index figures do not reflect any deduction of fees, taxes or expenses, and are not available for investment.
| | | | | | | | |
| AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED OCTOBER 31, 2016) | | | | |
| | | 1-year
period
ended
10/31/2016 | | | Since
Inception
(05/22/13) | |
Stone Ridge U.S. Variance Risk Premium Master Fund — Class I | | | 1.81% | | | | 5.82% | |
Stone Ridge U.S. Variance Risk Premium Master Fund — Class M | | | 1.72% | | | | 5.67% | |
BofA Merrill Lynch 3-Month U.S. Treasury Bill Index | | | 0.31% | | | | 0.11% | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
17
| | | | |
| STONE RIDGE INTERNATIONAL DEVELOPED MARKETS VARIANCE RISK PREMIUM FUND | | | | |
|
| PERFORMANCE DATA (Unaudited) |
This chart assumes an initial gross investment of $25,000,000 made on February 11, 2014 (commencement of operations). Returns shown include the reinvestment of all dividends. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. In the absence of fee waivers and reimbursements, total return would be reduced. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than the original cost.
The Bank of America (BofA) Merrill Lynch 3-Month U.S. Treasury Bill Index is an index of short-term U.S. Government securities with a remaining term to final maturity of less than three months. Index figures do not reflect any deduction of fees, taxes or expenses, and are not available for investment.
| | | | | | | | |
| AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED OCTOBER 31, 2016) | | | | | | |
| | | 1-year
period
ended
10/31/2016 | | | Since
Inception
(02/11/14) | |
Stone Ridge International Developed Markets Variance Risk Premium Fund — Class I | | | (0.89%) | | | | 1.08% | |
Stone Ridge International Developed Markets Variance Risk Premium Fund — Class M | | | (0.99%) | | | | 0.97% | |
BofA Merrill Lynch 3-Month U.S. Treasury Bill Index | | | 0.31% | | | | 0.13% | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
18
| | | | |
| STONE RIDGE EMERGING MARKETS VARIANCE RISK PREMIUM FUND | | | | |
|
| PERFORMANCE DATA (Unaudited) |
This chart assumes an initial gross investment of $25,000,000 made on February 11, 2014 (commencement of operations). Returns shown include the reinvestment of all dividends. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. In the absence of fee waivers and reimbursements, total return would be reduced. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than the original cost.
The Bank of America (BofA) Merrill Lynch 3-Month U.S. Treasury Bill Index is an index of short-term U.S. Government securities with a remaining term to final maturity of less than three months. Index figures do not reflect any deduction of fees, taxes or expenses, and are not available for investment.
| | | | | | | | |
| AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED OCTOBER 31, 2016) | | | | | | |
| | | 1-year
period
ended
10/31/2016 | | | Since
Inception
(02/11/14) | |
Stone Ridge Emerging Markets Variance Risk Premium Fund — Class I | | | 2.60% | | | | (1.95%) | |
Stone Ridge Emerging Markets Variance Risk Premium Fund — Class M | | | 2.38% | | | | (2.11%) | |
BofA Merrill Lynch 3-Month U.S. Treasury Bill Index | | | 0.31% | | | | 0.13% | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
19
| | | | |
| STONE RIDGE INTERNATIONAL VARIANCE RISK PREMIUM MASTER FUND | | | | |
|
| PERFORMANCE DATA (Unaudited) |
This chart assumes an initial gross investment of $25,000,000 made on February 11, 2014 (commencement of operations). Returns shown include the reinvestment of all dividends. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. In the absence of fee waivers and reimbursements, total return would be reduced. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than the original cost.
The Bank of America (BofA) Merrill Lynch 3-Month U.S. Treasury Bill Index is an index of short-term U.S. Government securities with a remaining term to final maturity of less than three months. Index figures do not reflect any deduction of fees, taxes or expenses, and are not available for investment.
| | | | | | | | |
| AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED OCTOBER 31, 2016) | | | | | | |
| | | 1-year
period
ended
10/31/2016 | | | Since
Inception
(02/11/14) | |
Stone Ridge International Variance Risk Premium Master Fund — Class I | | | 0.00% | | | | (0.27%) | |
Stone Ridge International Variance Risk Premium Master Fund — Class M | | | (0.11%) | | | | (0.39%) | |
BofA Merrill Lynch 3-Month U.S. Treasury Bill Index | | | 0.31% | | | | 0.13% | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
20
| | | | |
| STONE RIDGE GLOBAL EQUITY VARIANCE RISK PREMIUM MASTER FUND | | | | |
|
| PERFORMANCE DATA (Unaudited) |
This chart assumes an initial gross investment of $25,000,000 made on November 14, 2014 (commencement of operations). Returns shown include the reinvestment of all dividends. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. In the absence of fee waivers and reimbursements, total return would be reduced. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than the original cost.
The Bank of America (BofA) Merrill Lynch 3-Month U.S. Treasury Bill Index is an index of short-term U.S. Government securities with a remaining term to final maturity of less than three months. Index figures do not reflect any deduction of fees, taxes or expenses, and are not available for investment.
| | | | | | | | |
| AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED OCTOBER 31, 2016) | | | | | | |
| | | 1-year
period
ended
10/31/2016 | | | Since
Inception
(11/14/14) | |
Stone Ridge Global Equity Variance Risk Premium Master Fund — Class I | | | 0.92% | | | | 1.06% | |
Stone Ridge Global Equity Variance Risk Premium Master Fund — Class M | | | 0.71% | | | | 0.90% | |
BofA Merrill Lynch 3-Month U.S. Treasury Bill Index | | | 0.31% | | | | 0.16% | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
21
| | |
| Management’s Discussion of Fund Performance | | |
Stone Ridge Reinsurance Risk Premium Fund is designed to capture the reinsurance risk premium by investing in a broad set of reinsurance-linked securities, primarily focused on catastrophe bonds. For the twelve months ended October 31, 2016, the Fund’s total returns were 6.46%. The Fund’s performance is largely based on the occurrence or non-occurrence of natural or non-natural catastrophe events or other loss events around the world, which impact the performance of reinsurance-linked securities. The Fund’s exposures span many different regions and types of events covered. There were a number of natural and non-natural catastrophes around the world (for example the Alberta wildfire, Hurricane Matthew, and earthquakes in Japan and Ecuador) that did negatively impact certain of the Fund’s risk exposures, and therefore negatively impacted Fund performance. However, due in part to the breadth of the Fund’s risk exposures, the Fund’s performance was positive overall because premiums and coupons collected were greater than the losses incurred.
Stone Ridge High Yield Reinsurance Risk Premium Fund is designed to capture the reinsurance risk premium by investing in a broad set of reinsurance-linked securities, primarily focused on higher yielding catastrophe bonds. For the twelve months ended October 31, 2016, the Fund’s total returns were 6.82%. The Fund’s performance is largely based on the occurrence or non-occurrence of natural or non-natural catastrophe events or other loss events around the world, which impact the performance of reinsurance-linked securities. The Fund’s exposures span many different regions and types of events covered. There were a number of natural and non-natural catastrophes around the world (for example the Alberta wildfire, Hurricane Matthew, and earthquakes in Japan and Ecuador) that did negatively impact certain of the Fund’s risk exposures, and therefore negatively impacted Fund performance. However, due in part to the breadth of the Fund’s risk exposures, the Fund’s performance was positive overall because premiums and coupons collected were greater than the losses incurred.
Stone Ridge U.S. Large Cap Variance Risk Premium Fund is designed to capture the returns of the variance risk premium in U.S. large company stocks. For the 12 months ended October 31, 2016, total returns were 2.75%. The Fund’s performance is almost entirely based on derivatives. Performance is materially affected by two primary factors: exposure to the equity securities or equity indices underlying derivatives used by the Fund and exposure to the variance risk premium, which exists when the net premiums received by a seller of options and other derivatives, such as the Fund, exceed the net losses suffered on the resulting portfolio of derivative positions. The Fund’s performance is positively impacted by positive performance of the underlying equity securities or equity indices and by a positive variance risk premium. The variance risk premium is generally more likely to be positive during periods in which the “realized volatility” – the volatility actually experienced – of equity and equity index options is lower than the “implied volatility” – the expected level of volatility implied by an option’s price. Periods of positive performance for the Fund, such as the most recently completed fiscal year, correspond to periods when the combination of underlying exposure and variance risk premium exposure is positive. Periods of negative performance correspond to periods when the combination of underlying exposure and variance risk premium exposure is negative.
Stone Ridge U.S. Small Cap Variance Risk Premium Fund is designed to capture the returns of the variance risk premium in U.S. small company stocks. For the 12 months ended October 31, 2016, total returns were 0.31%. The Fund’s performance is almost entirely based on derivatives. Performance is materially affected by two primary factors: exposure to the equity securities or equity indices underlying derivatives used by the Fund and exposure to the variance risk premium, which exists when the net premiums received by a seller of options and other derivatives, such as the Fund, exceed the net losses suffered on the resulting portfolio of derivative positions. The Fund’s performance is positively impacted by positive performance of the underlying equity securities or equity indices and by a positive variance risk premium. The variance risk premium is generally more likely to be positive during periods in which the “realized volatility” – the volatility actually experienced – of equity and equity index options is lower than the “implied volatility” – the expected level of volatility implied by an option’s price. Periods of positive performance for the Fund, such as the most recently completed fiscal year, correspond to periods when the combination of underlying exposure and variance risk premium exposure is positive. Periods of negative performance correspond to periods when the combination of underlying exposure and variance risk premium exposure is negative.
Stone Ridge U.S. Variance Risk Premium Master Fund is designed to capture the returns of the variance risk premium in U.S. stocks by purchasing shares of the Stone Ridge U.S. Large Cap Variance Risk Premium Fund and the Stone Ridge U.S. Small Cap Variance Risk Premium Fund (the “Underlying U.S. Funds”). For the 12 months ended October 31, 2016,
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
22
| | |
| Management’s Discussion of Fund Performance | | |
total returns were 1.81%. A discussion of the factors that materially affected the performance of the Fund during the most recently completed fiscal year appears above under the discussion of the Underlying U.S. Funds’ performance.
Stone Ridge International Developed Markets Variance Risk Premium Fund is designed to capture the returns of the variance risk premium in developed market company stocks. For the 12 months ended October 31, 2016, total returns were -0.89%. The Fund’s performance is almost entirely based on derivatives. Performance is materially affected by two primary factors: exposure to the equity securities or equity indices underlying derivatives used by the Fund and exposure to the variance risk premium, which exists when the net premiums received by a seller of options and other derivatives, such as the Fund, exceed the net losses suffered on the resulting portfolio of derivative positions. The Fund’s performance is positively impacted by positive performance of the underlying equity securities or equity indices and by a positive variance risk premium. The variance risk premium is generally more likely to be positive during periods in which the “realized volatility” – the volatility actually experienced – of equity and equity index options is lower than the “implied volatility” – the expected level of volatility implied by an option’s price. Periods of positive performance for the Fund correspond to periods when the combination of underlying exposure and variance risk premium exposure is positive. Periods of negative performance, such as the most recently completed fiscal year, correspond to periods when the combination of underlying exposure and variance risk premium exposure is negative.
Stone Ridge Emerging Markets Variance Risk Premium Fund is designed to capture the returns of the variance risk premium in emerging market company stocks. For the 12 months ended October 31, 2016, total returns were 2.60%. The Fund’s performance is almost entirely based on derivatives. Performance is materially affected by two primary factors: exposure to the equity securities or equity indices underlying derivatives used by the Fund and exposure to the variance risk premium, which exists when the net premiums received by a seller of options and other derivatives, such as the Fund, exceed the net losses suffered on the resulting portfolio of derivative positions. The Fund’s performance is positively impacted by positive performance of the underlying equity securities or equity indices and by a positive variance risk premium. The variance risk premium is generally more likely to be positive during periods in which the “realized volatility” – the volatility actually experienced – of equity and equity index options is lower than the “implied volatility” – the expected level of volatility implied by an option’s price. Periods of positive performance for the Fund, such as the most recently completed fiscal year, correspond to periods when the combination of underlying exposure and variance risk premium exposure is positive. Periods of negative performance correspond to periods when the combination of underlying exposure and variance risk premium exposure is negative.
Stone Ridge International Variance Risk Premium Master Fund is designed to capture the returns of the variance risk premium in international stocks by purchasing shares of the Stone Ridge International Developed Markets Variance Risk Premium Fund and the Stone Ridge International Emerging Markets Variance Risk Premium Fund (the “Underlying International Funds”). For the 12 months ended October 31, 2016, total returns were 0.00%. A discussion of the factors that materially affected the performance of the Fund during the most recently completed fiscal year appears above under the discussion of the Underlying International Funds’ performance.
Stone Ridge Global Equity Variance Risk Premium Master Fund is designed to capture the returns of the variance risk premium in U.S. and international stocks by purchasing shares of each of the Underlying U.S. Funds and the Underlying International Funds. For the 12 months ended October 31, 2016, total returns were 0.92%. A discussion of the factors that materially affected the performance of the Fund during the most recently completed fiscal year appears above under the discussion of the performance of the Underlying U.S. Funds and the Underlying International Funds.
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
23
| | | | |
| ALLOCATION OF PORTFOLIO HOLDINGS AT OCTOBER 31, 2016 (Unaudited) | | | | |
| | | | | | | | |
| STONE RIDGE REINSURANCE RISK PREMIUM FUND PORTFOLIO ALLOCATION BY YEAR OF SCHEDULED MATURITY | |
| | |
| 2016 | | | $9,206,521 | | | | 0.9% | |
| | |
| 2017 | | | 357,773,249 | | | | 33.8% | |
| | |
| 2018 | | | 285,559,299 | | | | 26.9% | |
| | |
| 2019 | | | 169,124,210 | | | | 16.0% | |
| | |
| 2020 | | | 61,657,498 | | | | 5.8% | |
| | |
| 2021 | | | 81,683,235 | | | | 7.7% | |
| | |
| 2022 | | | 825,815 | | | | 0.1% | |
| | |
| 2023 | | | 9,939,976 | | | | 0.9% | |
| | |
| 2034 | | | 10,630,277 | | | | 1.0% | |
| | |
| Not Applicable | | | 97,605,483 | | | | 9.2% | |
| | |
| Other(2) | | | (24,119,249) | | | | (2.3%) | |
| | | $1,059,886,314 | | | | | |
| | | | | | | | |
| STONE RIDGE U.S. LARGE CAP VARIANCE RISK PREMIUM FUND PORTFOLIO ALLOCATION BY SECTOR | |
| | |
| Financials | | | $5,744 | | | | 0.0% | |
| | |
| Other(1) | | | 379,219,465 | | | | 100.0% | |
| | | $379,225,209 | | | | | |
| | | | | | | | |
| STONE RIDGE U.S. VARIANCE RISK PREMIUM MASTER FUND PORTFOLIO ALLOCATION BY HOLDINGS | |
| | |
| Stone Ridge U.S. Large Cap Variance Risk Premium Fund - Class I | | | $142,938,445 | | | | 67.0% | |
| | |
| Stone Ridge U.S. Small Cap Variance Risk Premium Fund - Class I | | | 70,735,027 | | | | 33.1% | |
| | |
| Other(2) | | | (107,439) | | | | (0.1%) | |
| | | $213,566,033 | | | | | |
| | | | | | | | |
| STONE RIDGE EMERGING MARKETS VARIANCE RISK PREMIUM FUND PORTFOLIO ALLOCATION BY SECTOR | |
| | |
| Other(1) | | | $48,704,391 | | | | 100.0% | |
| | | $48,704,391 | | | | | |
| | | | | | | | |
| STONE RIDGE HIGH YIELD REINSURANCE RISK PREMIUM FUND PORTFOLIO ALLOCATION BY YEAR OF SCHEDULED MATURITY | |
| | |
| 2016 | | | $18,385,126 | | | | 3.7% | |
| | |
| 2017 | | | 153,353,021 | | | | 30.8% | |
| | |
| 2018 | | | 148,862,229 | | | | 30.0% | |
| | |
| 2019 | | | 80,703,592 | | | | 16.2% | |
| | |
| 2020 | | | 14,900,194 | | | | 3.0% | |
| | |
| 2021 | | | 19,099,184 | | | | 3.8% | |
| | |
| 2023 | | | 1,694,108 | | | | 0.3% | |
| | |
| 2034 | | | 9,605,268 | | | | 1.9% | |
| | |
| Not Applicable | | | 51,105,574 | | | | 10.3% | |
| | |
| Other(1) | | | 272,087 | | | | 0.0% | |
| | | $497,980,383 | | | | | |
| | | | | | | | |
| STONE RIDGE U.S. SMALL CAP VARIANCE RISK PREMIUM FUND PORTFOLIO ALLOCATION BY SECTOR | |
| | |
| Telecommunication Services | | | $6,804 | | | | 0.0% | |
| | |
| Other(1) | | | 128,280,473 | | | | 100.0% | |
| | | $128,287,277 | | | | | |
| | | | | | | | |
| STONE RIDGE INTERNATIONAL DEVELOPED MARKETS VARIANCE RISK PREMIUM FUND PORTFOLIO ALLOCATION BY SECTOR | |
| | |
| Other(1) | | | $96,813,728 | | | | 100.0% | |
| | | $96,813,728 | | | | | |
| | | | | | | | |
| STONE RIDGE INTERNATIONAL VARIANCE RISK PREMIUM MASTER FUND PORTFOLIO ALLOCATION BY HOLDINGS | |
| | |
| Stone Ridge International Developed Markets Variance Risk Premium Fund - Class I | | | $7,808,414 | | | | 66.3% | |
| | |
| Stone Ridge Emerging Markets Variance Risk Premium Fund - Class I | �� | | 3,940,499 | | | | 33.4% | |
| | |
| Other(1) | | | 38,227 | | | | 0.3% | |
| | | $11,787,140 | | | | | |
| | | | |
| | The accompanying footnotes are an integral part of these Schedules of Investments. | | (Continued) |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
24
| | | | |
| ALLOCATION OF PORTFOLIO HOLDINGS AT OCTOBER 31, 2016 (Unaudited) | | | | |
| | | | | | | | |
| STONE RIDGE GLOBAL EQUITY VARIANCE RISK PREMIUM MASTER FUND PORTFOLIO ALLOCATION BY HOLDINGS | |
| | |
| Stone Ridge International Developed Markets Variance Risk Premium Fund - Class I | | | $13,607,866 | | | | 33.4% | |
| | |
| Stone Ridge U.S. Large Cap Variance Risk Premium Fund - Class I | | | 13,588,476 | | | | 33.3% | |
| | |
| Stone Ridge Emerging Markets Variance Risk Premium Fund - Class I | | | 6,751,049 | | | | 16.6% | |
| | |
| Stone Ridge U.S. Small Cap Variance Risk Premium Fund - Class I | | | 6,683,515 | | | | 16.4% | |
| | |
| Other(1) | | | 134,005 | | | | 0.3% | |
| | | $40,764,911 | | | | | |
| (1) | Cash, cash equivalents, short term investments and other assets less liabilities. |
| (2) | Cash, cash equivalents, short term investments and liabilities in excess of other assets. |
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. (“MSCI”) and Standard & Poor’s Financial Services LLC (“S&P”). GICS is a service mark of MSCI and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.
| | | | |
| | The accompanying footnotes are an integral part of these Schedules of Investments. | | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
25
| | |
| Schedule of Investments | | October 31, 2016 |
| | | | |
| STONE RIDGE REINSURANCE RISK PREMIUM FUND | | | | |
| | | | | | | | |
| | | PRINCIPAL
AMOUNT | | | FAIR
VALUE | |
| EVENT-LINKED BONDS - 83.1% | |
| | | | | | | | |
| China - 0.1% | | | | | | |
| | | | | | | | |
| Earthquake - 0.1% | | | | | | |
Panda Re 2015-1
4.334%, 06/30/2018 (a)(b)(c) (Cost: $1,397,000; Acquisition Date: 06/26/2015) | | $ | 1,397,000 | | | $ | 1,397,615 | |
| | | | | | | | |
| Europe - 0.5% | |
| | | | | | | | |
| Windstorm - 0.5% | |
Calypso Capital II Class B
4.100%, 01/08/2018 (a)(b)(c) (Cost: $3,733,927; Acquisition Date: 10/07/2013) | | EUR | 2,750,000 | | | | 3,053,694 | |
Green Fields II 2013-1 A
2.750%, 01/09/2017 (a)(b)(c) (Cost: $2,973,477; Acquisition Date: 06/20/2013) | | EUR | 2,250,000 | | | | 2,464,021 | |
| | | | | | | | |
| | | | | | | 5,517,715 | |
| | | | | | | | |
| Global - 30.0% | |
| | | | | | | | |
| Earthquake - 0.8% | |
Acorn Re 2015-1
4.183%, 07/17/2018 (a)(b)(c)(j) (Cost: $6,595,000; Acquisition Date: 07/20/2015) | | $ | 6,595,000 | | | | 6,791,201 | |
Tramline Re II 2013-1 A
3.534%, 07/07/2017 (a)(b)(c)(j) (Cost: $1,750,000; Acquisition Date: 06/19/2013) | | | 1,750,000 | | | | 1,753,938 | |
| | | | | | | | |
| | | | | | | 8,545,139 | |
| | | | | | | | |
| Mortality/Longevity - 2.7% | |
Benu Capital Class B
3.350%, 01/08/2020 (a)(b)(c) (Cost: $12,884,938; Acquisition Date: 04/21/2015) | | EUR | 12,000,000 | | | | 13,309,402 | |
Chesterfield Re 2014-1
4.500%, 12/15/2034 (c) (Cost: $10,574,102; Acquisition Date: 12/11/2014) | | $ | 10,574,102 | | | | 10,630,277 | |
Vita Capital VI
3.647%, 01/08/2021 (a)(b)(c)(j) (Cost: $3,000,000; Acquisition Date: 12/15/2015) | | | 3,000,000 | | | | 3,062,400 | |
Vitality Re VI Class B
2.384%, 01/08/2018 (a)(b)(c) (Cost: $1,000,000; Acquisition Date: 01/21/2015) | | | 1,000,000 | | | | 998,950 | |
| | | | | | | | |
| | | | | | | 28,001,029 | |
| | | | | | | | |
| Multiperil - 25.7% | |
Atlas IX 2015-1
8.291%, 01/07/2019 (a)(b)(c) (Cost: $4,910,000; Acquisition Date: 02/05/2015) | | | 4,910,000 | | | | 5,008,200 | |
| | | | | | | | |
| | | PRINCIPAL
AMOUNT | | | FAIR
VALUE | |
| Multiperil - 25.7% (continued) | |
Atlas IX 2016-1
8.206%, 01/08/2020 (a)(b)(c) (Cost: $17,215,000; Acquisition Date: 12/23/2015) | | $ | 17,215,000 | | | $ | 18,042,181 | |
Galileo Re 2013-1
7.684%, 01/09/2017 (a)(b)(c) (Cost: $5,500,000; Acquisition Date: 10/23/2013) | | | 5,500,000 | | | | 5,539,325 | |
Galileo Re 2015-1 Class A
13.784%, 01/08/2018 (a)(b)(c) (Cost: $12,951,248; Original Acquisition Date: 01/29/2015) | | | 12,861,000 | | | | 13,312,421 | |
Galileo Re 2016-1 Class A
13.784%, 01/08/2019 (a)(b)(c) (Cost: $9,285,000; Acquisition Date: 01/20/2016) | | | 9,285,000 | | | | 9,713,503 | |
Galileo Re 2016-1 Class B
9.284%, 01/08/2019 (a)(b)(c) (Cost: $9,285,000; Acquisition Date: 01/20/2016) | | | 9,285,000 | | | | 9,630,402 | |
Galileo Re 2016-1 Class C
7.284%, 01/08/2019 (a)(b)(c) (Cost: $9,285,000; Acquisition Date: 01/20/2016) | | | 9,285,000 | | | | 9,545,908 | |
Kilimanjaro Re 2014-1 Class B
4.784%, 04/30/2018 (a)(b)(c) (Cost: $10,802,000; Acquisition Date: 04/17/2014) | | | 10,802,000 | | | | 11,011,019 | |
Kilimanjaro Re 2014-2 Class C
4.034%, 11/25/2019 (a)(b)(c)(j) (Cost: $28,158,000; Acquisition Date: 11/07/2014) | | | 28,158,000 | | | | 28,583,186 | |
Kilimanjaro Re 2015-1 Class D
9.534%, 12/06/2019 (a)(b)(c) (Cost: $6,742,000; Acquisition Date: 11/10/2015) | | | 6,742,000 | | | | 7,055,166 | |
Kilimanjaro Re 2015-1 Class E
7.034%, 12/06/2019 (a)(b)(c) (Cost: $10,687,645; Original Acquisition Date: 11/10/2015) | | | 10,674,000 | | | | 11,066,803 | |
Loma Re 2013-1 A
9.654%, 01/08/2018 (a)(b)(c) (Cost: $2,271,000; Acquisition Date: 12/20/2013) | | | 2,271,000 | | | | 2,351,507 | |
Loma Re 2013-1 B
12.024%, 01/08/2018 (a)(b)(c) (Cost: $6,814,000; Acquisition Date: 12/20/2013) | | | 6,814,000 | | | | 7,052,831 | |
Loma Re 2013-1 C
18.024%, 01/08/2018 (a)(b)(c) (Cost: $11,781,000; Acquisition Date: 12/20/2013) | | | 11,781,000 | | | | 12,440,736 | |
Mythen Re 2012-2 A
9.098%, 01/05/2017 (a)(b)(c) (Cost: $579,275; Acquisition Date: 06/04/2013) | | | 578,000 | | | | 582,566 | |
| | | | |
| | The accompanying footnotes are an integral part of these Schedules of Investments. | | (Continued) |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
26
| | |
| Schedule of Investments | | October 31, 2016 |
| | | | |
| STONE RIDGE REINSURANCE RISK PREMIUM FUND | | | | |
| | | | | | | | |
| | | PRINCIPAL
AMOUNT | | | FAIR
VALUE | |
| Multiperil - 25.7% (continued) | |
Queen Street XII
6.337%, 04/08/2020 (a)(b)(c) (Cost: $2,414,000; Acquisition Date: 05/13/2016) | | $ | 2,414,000 | | | $ | 2,443,813 | |
Resilience Re Series 1642B
11.070%, 04/07/2017 (a)(b)(c)(d) (Cost: $9,651,607; Acquisition Date: 04/07/2016) | | | 10,720,000 | | | | 10,564,560 | |
Tradewynd Re 2013-1 1
9.934%, 07/09/2018 (a)(b)(c) (Cost: $10,357,000; Acquisition Date: 07/02/2013) | | | 10,357,000 | | | | 11,267,898 | |
Tradewynd Re 2013-2 3-A
6.494%, 01/09/2017 (a)(b)(c) (Cost: $12,481,000; Acquisition Date: 12/04/2013) | | | 12,481,000 | | | | 12,565,871 | |
Tradewynd Re 2013-2 3-B
7.174%, 01/09/2017 (a)(b)(c) (Cost: $10,698,000; Acquisition Date: 12/04/2013) | | | 10,698,000 | | | | 10,776,095 | |
Tradewynd Re 2014-1 Class 3-A
5.310%, 01/08/2018 (a)(b)(c) (Cost: $10,554,000; Acquisition Date: 12/05/2014) | | | 10,554,000 | | | | 10,717,059 | |
Tradewynd Re 2014-1 Class 3-B
7.450%, 01/08/2018 (a)(b)(c) (Cost: $28,143,000; Acquisition Date: 12/05/2014) | | | 28,143,000 | | | | 28,926,783 | |
Tramline Re II 2014-1 Class A
10.034%, 01/04/2019 (a)(b)(c) (Cost: $18,115,000; Acquisition Date: 12/04/2014) | | | 18,115,000 | | | | 18,777,103 | |
VenTerra Re 2013-1 A
4.034%, 01/09/2017 (a)(b)(c) (Cost: $15,310,795; Original Acquisition Date: 12/20/2013) | | | 15,310,000 | | | | 15,347,509 | |
| | | | | | | | |
| | | | | | | 272,322,445 | |
| | | | | | | | |
| Other - 0.3% | |
Operational Re
5.500%, 04/08/2021 (a)(c) (Cost: $3,551,138; Acquisition Date: 05/19/2016) | | CHF | 3,519,000 | | | | 3,534,291 | |
| | | | | | | | |
| Windstorm - 0.5% | |
Queen Street X Re Ltd
6.034%, 06/08/2018 (a)(b)(c)(j) (Cost: $901,000; Acquisition Date: 03/25/2015) | | $ | 901,000 | | | | 906,992 | |
Queen Street XI Re DAC
6.434%, 06/07/2019 (a)(b)(c)(j) (Cost: $4,104,000; Acquisition Date: 12/15/2015) | | | 4,104,000 | | | | 4,171,716 | |
| | | | | | | | |
| | | | | | | 5,078,708 | |
| | | | | | | | |
| | | | | | | 317,481,612 | |
| | | | | | | | |
| | | | | | | | |
| | | PRINCIPAL
AMOUNT | | | FAIR
VALUE | |
| Japan - 3.7% | |
| | | | | | | | |
| Earthquake - 3.6% | |
Kizuna Re II Class A
2.534%, 04/06/2018 (a)(b)(c)(j) (Cost: $6,750,000; Acquisition Date: 02/28/2014) | | $ | 6,750,000 | | | $ | 6,761,475 | |
Kizuna Re II Class B
2.784%, 04/06/2018 (a)(b)(c) (Cost: $4,500,000; Acquisition Date: 02/28/2014) | | | 4,500,000 | | | | 4,499,325 | |
Nakama Re
2.784%, 04/13/2018 (a)(b)(c)(j) (Cost: $4,250,000; Acquisition Date: 05/23/2014) | | | 4,250,000 | | | | 4,264,875 | |
Nakama Re 2014-2 Class 2
3.159%, 01/16/2020 (a)(b)(c)(j) (Cost: $5,631,936; Original Acquisition Date: 12/12/2014) | | | 5,625,000 | | | | 5,729,625 | |
Nakama Re 2015-1
3.534%, 01/14/2021 (a)(b)(c)(j) (Cost: $6,000,000; Acquisition Date: 12/14/2015) | | | 6,000,000 | | | | 6,153,600 | |
Nakama Re 2016-1 Class 1
3.068%, 10/13/2021 (a)(b)(c)(j) (Cost: $7,500,000; Acquisition Date: 09/21/2016) | | | 7,500,000 | | | | 7,501,875 | |
Nakama Re 2016-1 Class 2
4.118%, 10/13/2021 (a)(b)(c)|(j) (Cost: $3,364,000; Acquisition Date: 09/21/2016) | | | 3,364,000 | | | | 3,363,327 | |
| | | | | | | | |
| | | | | | | 38,274,102 | |
| | | | | | | | |
| Windstorm - 0.1% | |
Aozora Re 2016-1 A
3.278%, 04/07/2020 (a)(b)(c) (Cost: $797,000; Acquisition Date: 03/23/2016) | | | 797,000 | | | | 806,365 | |
| | | | | | | | |
| | | | | | | 39,080,467 | |
| | | | | | | | |
| Turkey - 0.3% | |
| | | | | | | | |
| Earthquake - 0.3% | |
Bosphorus Re 2015-1
4.036%, 08/17/2018 (a)(b)(c)(j) (Cost: $3,250,000; Acquisition Date: 08/11/2015) | | | 3,250,000 | | | | 3,280,550 | |
| | | | | | | | |
| | | | | | | | |
| United States - 48.5% | | | | | | |
| | | | | | | | |
| Earthquake - 4.8% | | | | | | |
Golden State Re II
2.484%, 01/08/2019 (a)(b)(c)(j) (Cost: $4,200,000; Acquisition Date: 09/10/2014) | | | 4,200,000 | | | | 4,181,520 | |
Merna Re 2015-1
2.284%, 04/09/2018 (a)(b)(c)(j) (Cost: $1,478,000; Acquisition Date: 03/16/2015) | | | 1,478,000 | | | | 1,481,769 | |
| | | | |
| | The accompanying footnotes are an integral part of these Schedules of Investments. | | (Continued) |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
27
| | |
| Schedule of Investments | | October 31, 2016 |
| | | | |
| STONE RIDGE REINSURANCE RISK PREMIUM FUND | | | | |
| | | | | | | | |
| | | PRINCIPAL
AMOUNT | | | FAIR
VALUE | |
| Earthquake - 4.8% (continued) | | | | | | |
Merna Re 2016-1
2.534%, 04/08/2019 (a)(b)(c) (Cost: $788,000; Acquisition Date: 03/24/2016) | | $ | 788,000 | | | $ | 793,831 | |
Ursa Re 2014-1 Class A
3.500%, 12/07/2017 (a)(b)(c) (Cost: $5,631,000; Acquisition Date: 11/14/2014) | | | 5,631,000 | | | | 5,657,466 | |
Ursa Re 2014-1 Class B
5.000%, 12/07/2017 (a)(b)(c)(j) (Cost: $20,237,000; Acquisition Date: 11/14/2014) | | | 20,237,000 | | | | 20,517,282 | |
Ursa Re 2015-1
5.000%, 09/21/2018 (a)(b)(c)(j) (Cost: $17,550,000; Acquisition Date: 09/10/2015) | | | 17,550,000 | | | | 17,907,143 | |
| | | | | | | | |
| | | | | | | 50,539,011 | |
| | | | | | | | |
| Multiperil - 26.3% | |
Blue Halo Re 2016-1 A
14.284%, 06/21/2019 (a)(b)(c) (Cost: $3,297,000; Acquisition Date: 06/10/2016) | | | 3,297,000 | | | | 3,203,200 | |
Blue Halo Re 2016-1 B
20.034%, 06/21/2019 (a)(b)(c) (Cost: $1,805,000; Acquisition Date: 06/10/2016) | | | 1,805,000 | | | | 1,754,550 | |
Blue Halo Re 2016-2 C
8.534%, 07/26/2019 (a)(b)(c) (Cost: $4,855,000; Acquisition Date: 07/18/2016) | | | 4,855,000 | | | | 4,930,738 | |
Caelus Re 2013-2 A
7.134%, 04/07/2017 (a)(b)(c) (Cost: $20,494,000; Acquisition Date: 03/28/2013) | | | 20,494,000 | | | | 20,912,078 | |
Caelus Re IV 2016-1
5.784%, 03/06/2020 (a)(b)(c) (Cost: $7,818,000; Acquisition Date: 02/23/2016) | | | 7,818,000 | | | | 8,164,337 | |
East Lane Re VI
2.934%, 03/14/2018 (a)(b)(c) (Cost: $14,467,000; Acquisition Date: 03/03/2014) | | | 14,467,000 | | | | 14,625,414 | |
East Lane VI 2015-1
3.674%, 03/13/2020 (a)(b)(c) (Cost: $7,597,000; Acquisition Date: 03/02/2015) | | | 7,597,000 | | | | 7,793,762 | |
Espada Re 2016-1 20
5.750%, 06/06/2020 (a)(b)(c) (Cost: $1,217,000; Acquisition Date: 02/12/2016) | | | 1,217,000 | | | | 1,233,430 | |
First Coast Re 2016-1 Class A
4.284%, 06/07/2019 (a)(b)(c) (Cost: $4,865,000; Acquisition Date: 05/25/2016) | | | 4,865,000 | | | | 4,953,056 | |
| | | | | | | | |
| | | PRINCIPAL
AMOUNT | | | FAIR
VALUE | |
| Multiperil - 26.3% (continued) | |
Laetere Re 2012-2 A
6.191%, 06/06/2017 (a)(b)(c)(d) (Cost: $2,680,802; Acquisition Date: 05/26/2016) | | $ | 2,780,000 | | | $ | 2,727,041 | |
Laetere Re 2016-1 B
10.175%, 06/06/2017 (a)(b)(c)(d) (Cost: $2,294,489; Acquisition Date: 05/26/2016) | | | 2,433,000 | | | | 2,362,686 | |
Laetere Re 2016-1 C
20.532%, 06/06/2017 (a)(b)(c)(d) (Cost: $4,966,154; Acquisition Date: 05/26/2016) | | | 5,560,000 | | | | 5,136,884 | |
Long Point Re III 2015-1
3.750%, 05/23/2018 (a)(b)(c) (Cost: $10,569,000; Acquisition Date: 05/07/2015) | | | 10,569,000 | | | | 10,825,298 | |
Mona Lisa Re 2013-2 A
7.584%, 07/07/2017 (a)(b)(c) (Cost: $16,164,000; Acquisition Date: 07/01/2013) | | | 16,164,000 | | | | 16,715,192 | |
PennUnion Re 2015-1
4.784%, 12/07/2018 (a)(b)(c) (Cost: $1,825,000; Acquisition Date: 10/05/2015) | | | 1,825,000 | | | | 1,865,880 | |
Residential Re 2012-2 2
6.034%, 12/06/2016 (a)(b)(c) (Cost: $1,150,234; Acquisition Date: 05/15/2013) | | | 1,149,000 | | | | 1,151,355 | |
Residential Re 2012-2 4
19.284%, 12/06/2016 (a)(b)(c) (Cost: $2,573,896; Acquisition Date: 05/03/2013) | | | 2,570,000 | | | | 2,592,359 | |
Residential Re 2012-2 Class 1
4.784%, 12/06/2018 (a)(b)(c) (Cost: $978,747; Acquisition Date: 09/23/2016) | | | 975,000 | | | | 976,560 | |
Residential Re 2013-1 11
8.284%, 06/06/2017 (a)(b)(c) (Cost: $23,100,000; Acquisition Date: 05/22/2013) | | | 23,100,000 | | | | 23,775,675 | |
Residential Re 2013-1 3
9.534%, 06/06/2017 (a)(b)(c) (Cost: $12,600,000; Acquisition Date: 05/22/2013) | | | 12,600,000 | | | | 13,092,660 | |
Residential Re 2013-2 1
20.284%, 12/06/2017 (a)(b)(c) (Cost: $8,518,157; Original Acquisition Date: 11/18/2013) | | | 8,485,000 | | | | 8,903,311 | |
Residential Re 2013-2 4
5.534%, 12/06/2017 (a)(b)(c) (Cost: $3,600,000; Acquisition Date: 11/18/2013) | | | 3,600,000 | | | | 3,645,000 | |
Residential Re 2014-1 10
15.364%, 06/06/2018 (a)(b)(c) (Cost: $9,197,000; Acquisition Date: 05/22/2014) | | | 9,197,000 | | | | 9,523,034 | |
| | | | |
| | The accompanying footnotes are an integral part of these Schedules of Investments. | | (Continued) |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
28
| | |
| Schedule of Investments | | October 31, 2016 |
| | | | |
| STONE RIDGE REINSURANCE RISK PREMIUM FUND | | | | |
| | | | | | | | |
| | | PRINCIPAL
AMOUNT | | | FAIR
VALUE | |
| Multiperil - 26.3% (continued) | |
Residential Re 2014-1
3.894%, 06/06/2018 (a)(b)(c)
(Cost: $2,544,000; Acquisition Date: 05/22/2014) | | $ | 2,544,000 | | | $ | 2,584,450 | |
Residential Re 2014-2 Class 4
5.084%, 12/06/2018 (a)(b)(c) (Cost: $5,653,000; Acquisition Date: 11/20/2014) | | | 5,653,000 | | | | 5,725,641 | |
Residential Re 2015-1 Class 10
11.254%, 06/06/2019 (a)(b)(c) (Cost: $4,070,000; Acquisition Date: 05/21/2015) | | | 4,070,000 | | | | 4,184,571 | |
Residential Re 2015-1 Class 11
6.244%, 06/06/2019 (a)(b)(c) (Cost: $4,428,000; Acquisition Date: 05/21/2015) | | | 4,428,000 | | | | 4,586,522 | |
Residential Re 2015-2 Class 3
7.534%, 12/06/2019 (a)(b)(c) (Cost: $8,495,000; Acquisition Date: 11/20/2015) | | | 8,495,000 | | | | 8,767,690 | |
Residential Re 2016-1 10
11.784%, 06/06/2023 (a)(b)(c) (Cost: $1,663,000; Acquisition Date: 04/28/2016) | | | 1,663,000 | | | | 1,716,382 | |
Residential Re 2016-1 11
5.034%, 06/06/2023 (a)(b)(c) (Cost: $2,138,000; Acquisition Date: 04/28/2016) | | | 2,138,000 | | | | 2,153,394 | |
Residential Re 2016-1 13
3.534%, 06/06/2023 (a)(b)(c) (Cost: $6,000,000; Acquisition Date: 04/28/2016) | | | 6,000,000 | | | | 6,070,200 | |
Riverfront Re 2014
4.284%, 01/06/2017 (a)(b)(c) (Cost: $4,512,000; Acquisition Date: 03/20/2014) | | | 4,512,000 | | | | 4,514,256 | |
Sanders Re 2013-1 A
3.784%, 05/05/2017 (a)(b)(c) (Cost: $22,000,000; Acquisition Date: 04/29/2013) | | | 22,000,000 | | | | 22,161,700 | |
Sanders Re 2013-1 B
4.284%, 05/05/2017 (a)(b)(c) (Cost: $5,407,000; Acquisition Date: 04/29/2013) | | | 5,407,000 | | | | 5,459,448 | |
Sanders Re 2014-1 B
3.364%, 05/25/2018 (a)(b)(c) (Cost: $18,750,000; Acquisition Date: 05/07/2014) | | | 18,750,000 | | | | 18,991,875 | |
Sanders Re 2014-1 C
3.584%, 05/25/2018 (a)(b)(c) (Cost: $19,000,000; Acquisition Date: 05/07/2014) | | | 19,000,000 | | | | 19,239,400 | |
Sanders Re 2014-2
4.054%, 06/07/2017 (a)(b)(c)(j) (Cost: $901,336; Original Acquisition Date: 05/23/2014) | | | 900,000 | | | | 907,245 | |
| | | | | | | | |
| | | PRINCIPAL
AMOUNT | | | FAIR
VALUE | |
| Multiperil - 26.3% (continued) | |
Skyline Re 2014-1 A
14.284%, 01/23/2017 (a)(b)(c) (Cost: $1,426,000; Acquisition Date: 01/23/2014) | | $ | 1,426,000 | | | $ | 1,446,463 | |
| | | | | | | | |
| | | | | | | 279,372,737 | |
| | | | | | | | |
| Windstorm - 17.4% | |
Alamo Re 2015-1 Class A
6.064%, 06/07/2018 (a)(b)(c) (Cost: $9,709,502; Acquisition Date: 01/23/2014) | | | 9,674,000 | | | | 10,063,378 | |
Alamo Re 2015-1 Class B
4.904%, 06/07/2018 (a)(b)(c) (Cost: $4,942,384; Original Acquisition Date: 05/06/2015) | | | 4,926,000 | | | | 5,147,177 | |
Alamo Re Ltd.
5.484%, 06/07/2017 (a)(b)(c) (Cost: $22,217,465; Original Acquisition Date: 06/18/2014) | | | 22,108,000 | | | | 22,519,209 | |
Armor Re Ltd.
4.734%, 12/15/2016 (a)(b)(c) (Cost: $5,450,000; Acquisition Date: 05/01/2014) | | | 5,450,000 | | | | 5,462,807 | |
Citrus Re 2014-1
5.294%, 04/18/2017 (a)(b)(c) (Cost: $6,353,000; Acquisition Date: 04/10/2014) | | | 6,353,000 | | | | 6,399,377 | |
Citrus Re 2014-2
4.584%, 04/24/2017 (a)(b)(c) (Cost: $1,410,000; Acquisition Date: 04/17/2014) | | | 1,410,000 | | | | 1,423,184 | |
Citrus Re 2015-1 Class A
5.424%, 04/09/2018 (a)(b)(c) (Cost: $5,985,000; Acquisition Date: 04/01/2015) | | | 5,985,000 | | | | 6,110,386 | |
Citrus Re 2015-1 Class B
7.244%, 04/09/2018 (a)(b)(c) (Cost: $8,977,000; Acquisition Date: 04/01/2015) | | | 8,977,000 | | | | 9,223,868 | |
Citrus Re 2015-1 Class C
9.314%, 04/09/2018 (a)(b)(c) (Cost: $2,768,000; Acquisition Date: 04/01/2015) | | | 2,768,000 | | | | 2,874,291 | |
Citrus Re 2016-1 D-50
7.784%, 02/25/2019 (a)(b)(c) (Cost: $3,887,000; Acquisition Date: 02/19/2016) | | | 3,887,000 | | | | 4,073,770 | |
Citrus Re 2016-1 E-50
10.784%, 02/25/2019 (a)(b)(c) (Cost: $3,239,000; Acquisition Date: 02/19/2016) | | | 3,239,000 | | | | 3,408,076 | |
Cranberry Re 2015-1
4.144%, 07/06/2018 (a)(b)(c) (Cost: $2,609,000; Acquisition Date: 04/23/2015) | | | 2,609,000 | | | | 2,682,313 | |
| | | | |
| | The accompanying footnotes are an integral part of these Schedules of Investments. | | (Continued) |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
29
| | |
| Schedule of Investments | | October 31, 2016 |
| | | | |
| STONE RIDGE REINSURANCE RISK PREMIUM FUND | | | | |
| | | | | | | | |
| | | PRINCIPAL
AMOUNT | | | FAIR
VALUE | |
| Windstorm - 17.4% (continued) | |
Everglades Re 2014
7.394%, 04/28/2017 (a)(b)(c) (Cost: $38,707,219; Original Acquisition Date: 04/24/2014) | | $ | 38,605,000 | | | $ | 39,409,914 | |
Everglades Re II 2015-1
5.514%, 05/03/2018 (a)(b)(c)(j) (Cost: $6,897,000; Acquisition Date: 04/30/2015) | | | 6,897,000 | | | | 7,037,009 | |
Gator Re 2014
6.554%, 01/09/2017 (a)(b)(c) (Cost: $13,750,000; Acquisition Date: 03/04/2014) | | | 13,750,000 | | | | 12,938,750 | |
Kilimanjaro Re 2014-1 Class A
5.034%, 04/30/2018 (a)(b)(c)(j) (Cost: $9,269,000; Acquisition Date: 04/17/2014) | | | 9,269,000 | | | | 9,440,477 | |
Manatee Re 2015-1
5.284%, 12/22/2017 (a)(b)(c) (Cost: $2,424,000; Acquisition Date: 03/23/2015) | | | 2,424,000 | | | | 2,450,543 | |
Manatee Re 2016-1 A
5.250%, 03/13/2019 (a)(b)(c) (Cost: $556,000; Acquisition Date: 03/02/2016) | | | 556,000 | | | | 564,729 | |
Manatee Re 2016-1 C
16.250%, 03/14/2022 (a)(b)(c) (Cost: $835,000; Acquisition Date: 03/02/2016) | | | 835,000 | | | | 825,815 | |
Market Re 2016-2
6.724%, 06/07/2017 (a)(b)(c)(d) (Cost: $6,459,000; Acquisition Date: 06/03/2016) | | | 6,459,000 | | | | 6,767,094 | |
Market Re 2016-3
3.000%, 07/08/2019 (a)(b)(c) (Cost: $4,000,000; Acquisition Date: 06/21/2016) | | | 4,000,000 | | | | 4,005,800 | |
Oakleaf Re Ltd. 2016-1 A
5.750%, 06/08/2017 (a)(b)(c) (Cost: $2,085,000; Acquisition Date: 05/31/2016) | | | 2,085,000 | | | | 2,166,732 | |
Pelican Re 2013-1 A
6.284%, 05/15/2017 (a)(b)(c) (Cost: $8,862,000; Acquisition Date: 04/24/2013) | | | 8,862,000 | | | | 9,046,773 | |
Queen City
3.784%, 01/06/2017 (a)(b)(c) (Cost: $10,000,000; Acquisition Date: 12/18/2013) | | | 10,000,000 | | | | 10,000,500 | |
| | | | | | | | |
| | | | | | | 184,041,972 | |
| | | | | | | | |
| | | | | | | 513,953,720 | |
| | | | | | | | |
TOTAL EVENT-LINKED BONDS
(Cost $863,393,473) | | | | | | | 880,711,679 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | PRINCIPAL
AMOUNT | | | FAIR
VALUE | |
PARTICIPATION NOTES - 10.0% | | | | | | | | |
| | | | | | | | |
Global - 10.0% | | | | | | | | |
| | | | | | | | |
| Multiperil - 10.0% | | | | | | |
Atlas Re X Class A
04/03/2017 (a)(c)(e) (Cost: $24,789,000; Acquisition Date: 12/23/2013) | | $ | 24,789,000 | | | $ | 27,122,901 | |
Eden Re II 2015-1
04/19/2018 (a)(e)(f)(g) (Cost: $0; Acquisition Date: 03/19/2015) | | | — | | | | 199,005 | |
Eden Re II 2016-1
04/23/2019 (a)(c)(e)(h) (Cost: $14,722,628; Original Acquisition Date: 12/30/2015) | | | 14,720,000 | | | | 16,164,170 | |
Sector Re V LTD Series 5 Class B
03/01/2020 (a)(f) (Cost: $61,538; Acquisition Date: 04/30/2015) | | | 61,538 | | | | 1,125,284 | |
Sector Re V LTD Series 5 Class F
03/01/2020 (a)(f) (Cost: $37,500; Acquisition Date: 04/27/2015) | | | 37,500 | | | | 844,346 | |
Sector Re V LTD Series 5 Class G
03/01/2020 (a)(f) (Cost: $60,208; Acquisition Date: 06/26/2015) | | | 60,208 | | | | 2,164,953 | |
Sector Re V LTD Series 6 Class B
03/01/2021 (a)(f)(h) (Cost: $17,790,802; Acquisition Date: 04/28/2016) | | | 17,790,802 | | | | 18,943,646 | |
Sector Re V LTD Series 6 Class F
03/01/2021 (a)(f)(h) (Cost: $4,012,000; Acquisition Date: 03/28/2016) | | | 4,012,000 | | | | 4,231,456 | |
Sector Re V LTD Series 6 Class G
03/01/2021 (a)(f)(h) (Cost: $33,083,000; Acquisition Date: 04/28/2016) | | | 33,083,000 | | | | 34,892,640 | |
| | | | | | | | |
| | | | | | | | |
TOTAL PARTICIPATION NOTES
(Cost $94,556,676) | | | | | | | 105,688,401 | |
| | | | | | | | |
| | |
| | | SHARES | | | FAIR
VALUE | |
PREFERENCE SHARES - 9.2% | | | | | | | | |
| | | | | | | | |
Global - 9.2% | | | | | | | | |
| | | | | | | | |
| Multiperil - 9.2% | | | | | | |
Arenal (Artex Segregated Account Company) (a)(e)(f) (Cost: $6,384,201; Acquisition Date: 03/28/2016) | | | 5,421 | | | | 6,522,054 | |
Biscayne (Artex Segregated Account Company) (a)(e)(f) (Cost: $17,415,491; Original Acquisition Date: 04/30/2014) | | | 17,296 | | | | 19,922,197 | |
| | | | |
| | The accompanying footnotes are an integral part of these Schedules of Investments. | | (Continued) |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
30
| | |
| Schedule of Investments | | October 31, 2016 |
| | | | |
| STONE RIDGE REINSURANCE RISK PREMIUM FUND | | | | |
| | | | | | | | |
| | |
| | | SHARES | | | FAIR
VALUE | |
| Multiperil - 9.2% (continued) | | | | | | |
Hatteras (Artex Segregated Account Company) (a)(e)(f) (Cost: $6,300,000; Acquisition Date: 12/30/2014) | | | 6,300 | | | $ | 7,243,460 | |
Hilo (Artex Segregated Account Company) (a)(e)(f)(h) (Cost: $2,469,074; Acquisition Date: 06/09/2015) | | | 2,469 | | | | 2,964,234 | |
Hudson Charles 2 (Mt Logan Re) (a)(f) (Cost: $8,062,500; Acquisition Date: 04/02/2014) | | | 8,063 | | | | 8,637,390 | |
Hudson Charles 3 (Mt Logan Re) (a)(f) (Cost: $11,904,000; Acquisition Date: 06/19/2014) | | | 11,904 | | | | 12,756,400 | |
Hudson Paul 3 (Mt Logan Re) (a)(f) (Cost: $8,062,500; Acquisition Date: 04/02/2014) | | | 8,063 | | | | 8,729,374 | |
Kona (Artex Segregated Account Company) (a)(e)(f)(h) (Cost: $2,149,137; Acquisition Date: 07/23/2015) | | | 2,412 | | | | 2,718,912 | |
LRe 2015 (a)(e)(f) (Cost: $25,828; Acquisition Date: 03/31/2015) | | | 258 | | | | 490,525 | |
LRe 2016 (a)(e)(f)(h) (Cost: $5,107,000; Acquisition Date: 04/01/2016) | | | 51,070 | | | | 5,500,997 | |
Minnewaska (Artex Segregated Account Company) (a)(e)(f)(h) (Cost: $3,744,456; Original Acquisition Date: 05/29/2015) | | | 3,216 | | | | 4,763,549 | |
Rondout (Artex Segregated Account Company) (a)(e)(f) (Cost: $6,891,227; Acquisition Date: 05/29/2015) | | | 6,083 | | | | 8,160,429 | |
Yoho (Artex Segregated Account Company) (a)(e)(f)(h) (Cost: $8,766,000; Acquisition Date: 05/17/2016) | | | 8,766 | | | | 9,195,962 | |
| | | | | | | | |
TOTAL PREFERENCE SHARES
(Cost $87,281,414) | | | | | | | 97,605,483 | |
| | | | | | | | |
| | | | | | | | |
SHORT-TERM INVESTMENTS - 0.0% | | | | | |
| | | | | | | | |
| Money Market Fund - 0.0% | |
Fidelity Institutional Money Market Funds - Government Portfolio - Institutional Class - 0.27% (i) | | | 26,377 | | | | 26,377 | |
| | | | | | | | |
| | |
| | | SHARES | | | FAIR
VALUE | |
| Money Market Fund - 0.0% (continued) | |
First American Government Obligations Fund - Class Z - 0.24% (i) | | | 26,377 | | | $ | 26,377 | |
First American Treasury Obligations Fund - Class Z - 0.22% (i) | | | 26,377 | | | | 26,377 | |
Short-Term Investments Trust - Treasury Portfolio - Institutional Class - 0.21% (i) | | | 26,377 | | | | 26,377 | |
| | | | | | | | |
TOTAL SHORT-TERM INVESTMENTS
(Cost $105,508) | | | | | | | 105,508 | |
| | | | | | | | |
TOTAL INVESTMENTS
(Cost $1,045,337,071) - 102.3% | | | | | | | 1,084,111,071 | |
| | | | | | | | |
LIABILITIES IN EXCESS OF OTHER ASSETS - (2.3)% | | | | | | | (24,224,757) | |
| | | | | | | | |
TOTAL NET ASSETS - 100.0% | | | | | | $ | 1,059,886,314 | |
| | | | | | | | |
Principal amounts stated in U.S. dollars unless otherwise stated.
Country shown is geographic area of peril risk.
Percentages are stated as a percent of net assets.
| (a) | Foreign issued security. Total foreign securities by country of domicile are $1,073,375,286. Foreign concentration is as follows: Bermuda: 79.9%, Cayman Islands: 16.7%, Ireland: 4.7% |
| (b) | Variable rate security. The rate shown is as of October 31, 2016. |
| (c) | Security is restricted to resale to institutional investors. The Fund’s Adviser has deemed this security to be liquid based upon procedures approved by the Board of Trustees. The aggregate value of these securities at October 31, 2016 was $923,998,750 which represented 87.2% of net assets. |
| (d) | Zero-coupon bond. Rate shown is the yield to maturity. |
| (e) | Security is fair valued by the Adviser pursuant to procedures approved by the Board of Trustees. The aggregate value of these securities is $110,968,395, which represents 10.5% of net assets. |
| (f) | Security is restricted to resale. The aggregate value of these securities at October 31, 2016 was $160,006,813, which represents 15.1% of net assets. |
| (g) | Security’s principal was returned in full so the fair value represents the expected future dividend receipt. |
| (h) | Non-income producing security. |
| (i) | Rate shown is the 7-day effective yield. |
| (j) | All or a portion of these securities are held as collateral as part of the Fund’s financing facility. |
| | | | |
| | The accompanying footnotes are an integral part of these Schedules of Investments. | | (Continued) |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
31
| | |
| Schedule of Investments | | October 31, 2016 |
| | | | |
| STONE RIDGE REINSURANCE RISK PREMIUM FUND | | | | |
Open Futures Contracts
| | | | | | | | | | | | |
| DESCRIPTION | | NUMBER OF
CONTRACTS SOLD | | | NOTIONAL
VALUE | | | UNREALIZED
APPRECIATION | |
| FUTURES CONTRACTS SOLD | | | | | | | | | |
Euro Fx, December 2016 Settlement | | | 137 | | | $ | 18,815,238 | | | $ | 538,292 | |
Swiss Franc, December 2016 Settlement | | | 28 | | | | 3,542,700 | | | | 85,691 | |
U.S. Treasury 5-Year Note, December 2016 Settlement | | | 56 | | | | 6,764,625 | | | | 25,733 | |
| | | | | | | | | | | | |
TOTAL FUTURES CONTRACTS SOLD | | | | | | $ | 29,122,563 | | | $ | 649,716 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| DESCRIPTION | | NUMBER OF
CONTRACTS PURCHASED | | | NOTIONAL
VALUE | | | UNREALIZED
DEPRECIATION | |
| FUTURES CONTRACTS PURCHASED | | | | | | | | | |
Canadian Dollar, December 2016 Settlement | | | 13 | | | $ | 968,825 | | | $ | (44,487) | |
| | | | | | | | | | | | |
TOTAL FUTURES CONTRACTS PURCHASED | | | | | | $ | 968,825 | | | $ | (44,487) | |
| | | | | | | | | | | | |
| | | | |
| | The accompanying footnotes are an integral part of these Schedules of Investments. | | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
32
| | |
| Schedule of Investments | | October 31, 2016 |
| | | | |
| STONE RIDGE HIGH YIELD REINSURANCE RISK PREMIUM FUND | | | | |
| | | | | | | | |
| | | PRINCIPAL
AMOUNT | | | FAIR
VALUE | |
EVENT-LINKED BONDS - 81.3% | |
| | | | | | | | |
China - 0.1% | |
| | | | | | | | |
| Earthquake - 0.1% | |
Panda Re 2015-1
4.334%, 06/30/2018 (a)(b)(c)
(Cost: $668,000; Acquisition
Date: 06/26/2015) | | $ | 668,000 | | | $ | 668,294 | |
| | | | | | | | |
| | | | | | | | |
Global - 26.9% | | | | | | | | |
| | | | | | | | |
| Earthquake - 0.6% | | | | | | |
Acorn Re 2015-1
4.183%, 07/17/2018 (a)(b)(c)(j)
(Cost: $3,155,000; Acquisition
Date: 06/02/2015) | | | 3,155,000 | | | | 3,248,861 | |
| | | | | | | | |
| | | | | | | | |
| Mortality/Longevity - 1.9% | | | | | | |
Chesterfield Re 2014-1
4.500%, 12/15/2034 (c)
(Cost: $9,554,510; Acquisition
Date: 12/11/2014) | | | 9,554,510 | | | | 9,605,268 | |
| | | | | | | | |
| | | | | | | | |
| Multiperil - 23.6% | | | | | | |
Atlas IX 2015-1
8.291%, 01/07/2019 (a)(b)(c)
(Cost: $2,074,000; Acquisition
Date: 02/05/2015) | | | 2,074,000 | | | | 2,115,480 | |
Atlas IX 2016-1
8.206%, 01/08/2020 (a)(b)(c)
(Cost: $8,035,000; Acquisition
Date: 12/23/2015) | | | 8,035,000 | | | | 8,421,082 | |
Galileo Re 2013-1
7.684%, 01/09/2017 (a)(b)(c)
(Cost: $4,000,000; Acquisition
Date: 10/23/2013) | | | 4,000,000 | | | | 4,028,600 | |
Galileo Re 2015-1 Class A
13.784%, 01/08/2018 (a)(b)(c)
(Cost: $5,100,224; Original Acquisition Date: 01/29/2015) | | | 5,069,000 | | | | 5,246,922 | |
Galileo Re 2016-1 Class A
13.784%, 01/08/2019 (a)(b)(c)
(Cost: $4,333,000; Acquisition
Date: 01/20/2016) | | | 4,333,000 | | | | 4,532,968 | |
Galileo Re 2016-1 Class B
9.284%, 01/08/2019 (a)(b)(c)(j)
(Cost: $4,333,000; Acquisition
Date: 01/20/2016) | | | 4,333,000 | | | | 4,494,188 | |
Galileo Re 2016-1 Class C
7.284%, 01/08/2019 (a)(b)(c)(j)
(Cost: $4,332,000; Acquisition
Date: 01/20/2016) | | | 4,332,000 | | | | 4,453,729 | |
Kilimanjaro Re 2014-1 Class B
4.784%, 04/30/2018 (a)(b)(c)
(Cost: $5,944,000; Acquisition
Date: 04/17/2014) | | | 5,944,000 | | | | 6,059,016 | |
Kilimanjaro Re 2014-2 Class C
4.034%, 11/25/2019 (a)(b)(c)(j)
(Cost: $11,842,000; Acquisition
Date: 11/07/2014) | | | 11,842,000 | | | | 12,020,814 | |
| | | | | | | | |
| | | PRINCIPAL
AMOUNT | | | FAIR
VALUE | |
| Multiperil - 23.6% (continued) | | | | | | |
Kilimanjaro Re 2015-1 Class D
9.534%, 12/06/2019 (a)(b)(c)(j) (Cost: $3,258,000; Acquisition Date: 11/10/2015) | | $ | 3,258,000 | | | $ | 3,409,334 | |
Kilimanjaro Re 2015-1 Class E
7.034%, 12/06/2019 (a)(b)(c)(j) (Cost: $5,115,990; Original Acquisition Date: 11/10/2015) | | | 5,110,000 | | | | 5,298,048 | |
Loma Re 2013-1 A
9.654%, 01/08/2018 (a)(b)(c) (Cost: $1,394,000; Acquisition Date: 12/20/2013) | | | 1,394,000 | | | | 1,443,417 | |
Loma Re 2013-1 B
12.024%, 01/08/2018 (a)(b)(c) (Cost: $3,181,000; Acquisition Date: 12/20/2013) | | | 3,181,000 | | | | 3,292,494 | |
Loma Re 2013-1 C
18.024%, 01/08/2018 (a)(b)(c) (Cost: $7,230,000; Acquisition Date: 12/20/2013) | | | 7,230,000 | | | | 7,634,880 | |
Mythen Re 2012-2 A
9.098%, 01/05/2017 (a)(b)(c)(j) (Cost: $422,931; Acquisition Date: 06/04/2013) | | | 422,000 | | | | 425,334 | |
Queen Street XII
6.337%, 04/08/2020 (a)(b)(c) (Cost: $1,049,000; Acquisition Date: 05/13/2016) | | | 1,049,000 | | | | 1,061,955 | |
Resilience Re Series 1642B
11.070%, 04/07/2017 (a)(b)(c)(d) (Cost: $4,223,478; Acquisition Date: 04/07/2016) | | | 4,691,000 | | | | 4,622,981 | |
Tradewynd Re 2013-1 1
9.934%, 07/09/2018 (a)(b)(c) (Cost: $4,143,000; Acquisition Date: 07/02/2013) | | | 4,143,000 | | | | 4,507,377 | |
Tradewynd Re 2013-2 3-A
6.494%, 01/09/2017 (a)(b)(c) (Cost: $5,019,000; Acquisition Date: 12/04/2013) | | | 5,019,000 | | | | 5,053,129 | |
Tradewynd Re 2013-2 3-B
7.174%, 01/09/2017 (a)(b)(c) (Cost: $4,302,000; Acquisition Date: 12/04/2013) | | | 4,302,000 | | | | 4,333,405 | |
Tradewynd Re 2014-1 Class 3-A
5.310%, 01/08/2018 (a)(b)(c) (Cost: $4,446,000; Acquisition Date: 12/05/2014) | | | 4,446,000 | | | | 4,514,691 | |
Tradewynd Re 2014-1 Class 3-B
7.450%, 01/08/2018 (a)(b)(c) (Cost: $11,857,000; Acquisition Date: 12/05/2014) | | | 11,857,000 | | | | 12,187,217 | |
Tramline Re II 2014-1 Class A
10.034%, 01/04/2019 (a)(b)(c) (Cost: $7,635,000; Acquisition Date: 12/04/2014) | | | 7,635,000 | | | | 7,914,059 | |
| | | | |
| | The accompanying footnotes are an integral part of these Schedules of Investments. | | (Continued) |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
33
| | |
| Schedule of Investments | | October 31, 2016 |
| | | | |
| STONE RIDGE HIGH YIELD REINSURANCE RISK PREMIUM FUND | | | | |
| | | | | | | | |
| | | PRINCIPAL
AMOUNT | | | FAIR
VALUE | |
| Multiperil - 23.6% (continued) | | | | | | |
VenTerra Re 2013-1 A
4.034%, 01/09/2017 (a)(b)(c) (Cost: $312,348; Acquisition Date: 04/21/2016) | | $ | 312,000 | | | $ | 312,764 | |
| | | | | | | | |
| | | | | | | 117,383,884 | |
| | | | | | | | |
| Other - 0.3% | | | | | | |
Operational Re
5.500%, 04/08/2021 (a)(c)
(Cost: $1,541,955; Acquisition
Date: 05/19/2016) | | CHF | 1,528,000 | | | | 1,534,640 | |
| | | | | | | | |
| Windstorm - 0.5% | | | | | | |
Queen Street X Re Ltd
6.034%, 06/08/2018 (a)(b)(c)(j) (Cost: $378,000; Acquisition Date: 03/25/2015) | | $ | 378,000 | | | | 380,514 | |
Queen Street XI Re DAC
6.434%, 06/07/2019 (a)(b)(c)(j) (Cost: $1,896,000; Acquisition Date: 12/15/2015) | | | 1,896,000 | | | | 1,927,284 | |
| | | | | | | | |
| | | | | | | 2,307,798 | |
| | | | | | | | |
| | | | | | | 134,080,451 | |
| | | | | | | | |
Japan - 0.4% | | | | | | | | |
| | | | | | | | |
| Earthquake - 0.3% | | | | | | |
Nakama Re 2016-1 Class 2
4.118%, 10/13/2021 (a)(b)(c)
(Cost: $1,466,000; Acquisition
Date: 09/21/2016) | | | 1,466,000 | | | | 1,465,707 | |
| | | | | | | | |
| Windstorm - 0.1% | | | | | | |
Aozora Re 2016-1 A
3.278%, 04/07/2020 (a)(b)(c)
(Cost: $352,000; Acquisition
Date: 03/23/2016) | | | 352,000 | | | | 356,136 | |
| | | | | | | | |
| | | | | | | 1,821,843 | |
| | | | | | | | |
United States - 53.9% | | | | | | | | |
| | | | | | | | |
| Earthquake - 4.6% | | | | | | |
Golden State Re II
2.484%, 01/08/2019 (a)(b)(c)(j)
(Cost: $2,900,000; Acquisition
Date: 09/10/2014) | | | 2,900,000 | | | | 2,887,240 | |
Merna Re 2016-1
2.534%, 04/08/2019 (a)(b)(c)
(Cost: $343,000; Acquisition
Date: 03/24/2016) | | | 343,000 | | | | 345,538 | |
Ursa Re 2014-1 Class A
3.500%, 12/07/2017 (a)(b)(c)
(Cost: $2,369,000; Acquisition
Date: 11/14/2014) | | | 2,369,000 | | | | 2,380,134 | |
Ursa Re 2014-1 Class B
5.000%, 12/07/2017 (a)(b)(c)(j)
(Cost: $8,513,000; Acquisition
Date: 11/14/2014) | | | 8,513,000 | | | | 8,630,905 | |
| | | | | | | | |
| | | PRINCIPAL
AMOUNT | | | FAIR
VALUE | |
| Earthquake - 4.6% (continued) | | | | | | |
Ursa Re 2015-1
5.000%, 09/21/2018 (a)(b)(c)(j)
(Cost: $8,450,000; Acquisition
Date: 09/10/2015) | | $ | 8,450,000 | | | $ | 8,621,958 | |
| | | | | | | | |
| | | | | | | 22,865,775 | |
| | | | | | | | |
| Multiperil - 21.4% | | | | | | |
Blue Halo Re 2016-1 A
14.284%, 06/21/2019 (a)(b)(c)
(Cost: $1,453,000; Acquisition
Date: 06/10/2016) | | | 1,453,000 | | | | 1,411,662 | |
Blue Halo Re 2016-1 B
20.034%, 06/21/2019 (a)(b)(c)
(Cost: $795,000; Acquisition
Date: 06/10/2016) | | | 795,000 | | | | 772,780 | |
Blue Halo Re 2016-2 C
8.534%, 07/26/2019 (a)(b)(c)
(Cost: $2,145,000; Acquisition
Date: 07/18/2016) | | | 2,145,000 | | | | 2,178,462 | |
Caelus Re 2013-2 A
7.134%, 04/07/2017 (a)(b)(c)(j)
(Cost: $11,506,000; Acquisition
Date: 03/28/2013) | | | 11,506,000 | | | | 11,740,722 | |
East Lane Re VI
2.934%, 03/14/2018 (a)(b)(c)
(Cost: $6,340,000; Acquisition
Date: 03/03/2014) | | | 6,340,000 | | | | 6,409,423 | |
East Lane VI 2015-1
3.674%, 03/13/2020 (a)(b)(c)
(Cost: $3,190,000; Acquisition
Date: 03/02/2015) | | | 3,190,000 | | | | 3,272,621 | |
Espada Re 2016-1 20
5.750%, 06/06/2020 (a)(b)(c)
(Cost: $568,000; Acquisition
Date: 02/12/2016) | | | 568,000 | | | | 575,668 | |
First Coast Re 2016-1 Class A
4.284%, 06/07/2019 (a)(b)(c)
(Cost: $2,135,000; Acquisition
Date: 05/25/2016) | | | 2,135,000 | | | | 2,173,643 | |
Laetere Re 2016-1 A
6.191%, 06/06/2017 (a)(b)(c)(d)
(Cost: $1,176,467; Acquisition
Date: 05/26/2016) | | | 1,220,000 | | | | 1,196,759 | |
Laetere Re 2016-1 B
10.175%, 06/06/2017 (a)(b)(c)(d)
(Cost: $1,006,255; Acquisition
Date: 05/26/2016) | | | 1,067,000 | | | | 1,036,164 | |
Laetere Re 2016-1 C
20.532%, 06/06/2017 (a)(b)(c)(d)
(Cost: $2,179,391; Acquisition
Date: 05/26/2016) | | | 2,440,000 | | | | 2,254,316 | |
Long Point Re III 2015-1
3.750%, 05/23/2018 (a)(b)(c)(j)
(Cost: $4,431,000; Acquisition
Date: 05/07/2015) | | | 4,431,000 | | | | 4,538,452 | |
| | | | |
| | The accompanying footnotes are an integral part of these Schedules of Investments. | | (Continued) |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
34
| | |
| Schedule of Investments | | October 31, 2016 |
| | | | |
| STONE RIDGE HIGH YIELD REINSURANCE RISK PREMIUM FUND | | | | |
| | | | | | | | |
| | | PRINCIPAL
AMOUNT | | | FAIR
VALUE | |
| Multiperil - 21.4% (continued) | | | | | | |
Mona Lisa Re 2013-2 A
7.584%, 07/07/2017 (a)(b)(c)(j)
(Cost: $1,836,000; Acquisition
Date: 07/01/2013) | | $ | 1,836,000 | | | $ | 1,898,608 | |
PennUnion Re 2015-1
4.784%, 12/07/2018 (a)(b)(c)
(Cost: $1,004,000; Acquisition
Date: 10/05/2015) | | | 1,004,000 | | | | 1,026,490 | |
Residential Re 2012-2 2
6.034%, 12/06/2016 (a)(b)(c)
(Cost: $851,914; Acquisition
Date: 05/15/2013) | | | 851,000 | | | | 852,745 | |
Residential Re 2012-2 4
19.284%, 12/06/2016 (a)(b)(c)
(Cost: $1,782,698; Acquisition
Date: 05/03/2013) | | | 1,780,000 | | | | 1,795,486 | |
Residential Re 2012-2 Class 1
4.784%, 12/06/2018 (a)(b)(c)
(Cost: $426,633; Acquisition
Date: 09/23/2016) | | | 425,000 | | | | 425,680 | |
Residential Re 2013-1 11
8.284%, 06/06/2017 (a)(b)(c)(j)
(Cost: $15,400,000; Acquisition
Date: 05/22/2013) | | | 15,400,000 | | | | 15,850,450 | |
Residential Re 2013-1
9.534%, 06/06/2017 (a)(b)(c)
(Cost: $8,400,000; Acquisition
Date: 05/22/2013) | | | 8,400,000 | | | | 8,728,440 | |
Residential Re 2013-2 1
20.284%, 12/06/2017 (a)(b)(c)
(Cost: $4,152,592; Original Acquisition Date: 11/18/2013) | | | 4,138,000 | | | | 4,342,003 | |
Residential Re 2013-2 4
5.534%, 12/06/2017 (a)(b)(c)
(Cost: $1,900,000; Acquisition
Date: 11/18/2013) | | | 1,900,000 | | | | 1,923,750 | |
Residential Re 2014-1 10
15.364%, 06/06/2018 (a)(b)(c)
(Cost: $3,965,000; Acquisition
Date: 05/22/2014) | | | 3,965,000 | | | | 4,105,559 | |
Residential Re 2014-1 13
3.894%, 06/06/2018 (a)(b)(c)
(Cost: $1,097,000; Acquisition
Date: 05/22/2014) | | | 1,097,000 | | | | 1,114,442 | |
Residential Re 2014-2 Class 4
5.084%, 12/06/2018 (a)(b)(c)
(Cost: $2,347,000; Acquisition
Date: 11/20/2014) | | | 2,347,000 | | | | 2,377,159 | |
Residential Re 2015-1 Class 10
11.254%, 06/06/2019 (a)(b)(c)
(Cost: $1,983,000; Acquisition
Date: 05/21/2015) | | | 1,983,000 | | | | 2,038,821 | |
Residential Re 2015-1 Class 11
6.244%, 06/06/2019 (a)(b)(c)
(Cost: $2,157,000; Acquisition
Date: 05/21/2015) | | | 2,157,000 | | | | 2,234,221 | |
| | | | | | | | |
| | | PRINCIPAL
AMOUNT | | | FAIR
VALUE | |
| Multiperil - 21.4% (continued) | | | | | | |
Residential Re 2015-2 Class 3
7.534%, 12/06/2019 (a)(b)(c)
(Cost: $4,005,000; Acquisition
Date: 05/20/2015) | | $ | 4,005,000 | | | $ | 4,133,561 | |
Residential Re 2016-1 10
11.784%, 06/06/2023 (a)(b)(c) (Cost: $728,000; Acquisition Date: 04/28/2016) | | | 728,000 | | | | 751,369 | |
Residential Re 2016-1 11
5.034%, 06/06/2023 (a)(b)(c) (Cost: $936,000; Acquisition Date: 04/28/2016) | | | 936,000 | | | | 942,739 | |
Riverfront Re 2014
4.284%, 01/06/2017 (a)(b)(c) (Cost: $1,966,000; Acquisition Date: 05/20/2014) | | | 1,966,000 | | | | 1,966,983 | |
Sanders Re 2013-1 B
4.284%, 05/05/2017 (a)(b)(c)(j) (Cost: $4,593,000; Acquisition Date: 04/29/2013) | | | 4,593,000 | | | | 4,637,552 | |
Sanders Re 2014-1 D
4.154%, 05/28/2019 (a)(b)(c) (Cost: $6,705,000; Acquisition Date: 05/07/2014) | | | 6,705,000 | | | | 6,832,730 | |
Sanders Re 2014-2
4.054%, 06/07/2017 (a)(b)(c) (Cost: $206,385; Acquisition Date: 04/27/2016) | | | 206,000 | | | | 207,658 | |
Skyline Re 2014-1 A
14.284%, 01/23/2017 (a)(b)(c) (Cost: $408,000; Acquisition Date: 01/22/2014) | | | 408,000 | | | | 413,855 | |
| | | | | | | | |
| | | | | | | 106,160,973 | |
| | | | | | | | |
| Windstorm - 27.9% | |
Alamo Re 2015-1 Class A
6.064%, 06/07/2018 (a)(b)(c) (Cost: $25,073,685; Original Acquisition Date: 05/06/2015) | | | 25,058,000 | | | | 26,066,584 | |
Alamo Re 2015-1 Class B
4.904%, 06/07/2018 (a)(b)(c) (Cost: $12,015,000; Acquisition Date: 05/06/2015) | | | 12,015,000 | | | | 12,554,473 | |
Armor Re Ltd.
4.734%, 12/15/2016 (a)(b)(c) (Cost: $15,700,000; Acquisition Date: 05/01/2014) | | | 15,700,000 | | | | 15,736,895 | |
Citrus Re 2014-1
5.294%, 04/18/2017 (a)(b)(c) (Cost: $2,703,000; Acquisition Date: 04/10/2014) | | | 2,703,000 | | | | 2,722,732 | |
Citrus Re 2014-2
4.584%, 04/24/2017 (a)(b)(c) (Cost: $607,000; Acquisition Date: 04/17/2014) | | | 607,000 | | | | 612,675 | |
Citrus Re 2015-1 Class A
5.424%, 04/09/2018 (a)(b)(c) (Cost: $2,514,000; Acquisition Date: 04/01/2015) | | | 2,514,000 | | | | 2,566,668 | |
| | | | |
| | The accompanying footnotes are an integral part of these Schedules of Investments. | | (Continued) |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
35
| | |
| Schedule of Investments | | October 31, 2016 |
| | | | |
| STONE RIDGE HIGH YIELD REINSURANCE RISK PREMIUM FUND | | | | |
| | | | | | | | |
| | | PRINCIPAL
AMOUNT | | | FAIR
VALUE | |
| Windstorm - 27.9% (continued) | |
Citrus Re 2015-1 Class B
7.244%, 04/09/2018 (a)(b)(c) (Cost: $3,770,000; Acquisition Date: 04/01/2015) | | $ | 3,770,000 | | | $ | 3,873,675 | |
Citrus Re 2015-1 Class C
9.314%, 04/09/2018 (a)(b)(c) (Cost: $1,163,000; Acquisition Date: 04/01/2015) | | | 1,163,000 | | | | 1,207,659 | |
Citrus Re 2016-1 D-50
7.784%, 02/25/2019 (a)(b)(c) (Cost: $856,000; Acquisition Date: 02/19/2016) | | | 856,000 | | | | 897,131 | |
Citrus Re 2016-1 E-50
10.784%, 02/25/2019 (a)(b)(c) (Cost: $713,000; Acquisition Date: 02/19/2016) | | | 713,000 | | | | 750,219 | |
Cranberry Re 2015-1
4.144%, 07/06/2018 (a)(b)(c) (Cost: $1,097,000; Acquisition Date: 04/25/2015) | | | 1,097,000 | | | | 1,127,826 | |
Everglades Re 2014
7.394%, 04/28/2017 (a)(b)(c) (Cost: $28,682,140; Original Acquisition Date: 04/24/2014) | | | 28,637,000 | | | | 29,234,081 | |
Everglades Re II 2015-1
5.514%, 05/03/2018 (a)(b)(c)(j) (Cost: $19,103,000; Acquisition Date: 04/30/2015) | | | 19,103,000 | | | | 19,490,791 | |
Gator Re 2014
6.554%, 01/09/2017 (a)(b)(c) (Cost: $6,026,000; Acquisition Date: 03/04/2014) | | | 6,026,000 | | | | 5,670,466 | |
Kilimanjaro Re 2014-1 Class A 5.034%, 04/30/2018 (a)(b)(c)(j) (Cost: $3,991,000; Acquisition Date: 04/17/2014) | | | 3,991,000 | | | | 4,064,834 | |
Manatee Re 2015-1
5.284%, 12/22/2017 (a)(b)(c) (Cost: $1,005,000; Acquisition Date: 03/23/2015) | | | 1,005,000 | | | | 1,016,005 | |
Market Re 2016-2
6.724%, 06/07/2017 (a)(b)(c)(d) (Cost: $2,841,000; Acquisition Date: 06/03/2016) | | | 2,841,000 | | | | 2,976,516 | |
Oakleaf Re Ltd. 2016-1 A
5.750%, 06/08/2017 (a)(b)(c) (Cost: $915,000; Acquisition Date: 05/31/2016) | | | 915,000 | | | | 950,868 | |
Pelican Re 2013-1 A
6.284%, 05/15/2017 (a)(b)(c) (Cost: $7,388,000; Acquisition Date: 04/24/2013) | | | 7,388,000 | | | | 7,542,040 | |
| | | | | | | | |
| | | | | | | 139,062,138 | |
| | | | | | | | |
| | | | | | | 268,088,886 | |
| | | | | | | | |
TOTAL EVENT-LINKED BONDS
(Cost $395,106,596) | | | | | | | 404,659,474 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | PRINCIPAL
AMOUNT | | | FAIR
VALUE | |
PARTICIPATION NOTES - 8.4% | | | | | | | | |
| | | | | | | | |
| Global - 8.4% | | | | | | |
| | | | | | | | |
| Multiperil - 8.4% | | | | | | |
Atlas Re X Class A
04/03/2017 (a)(c)(e) (Cost: $15,211,000; Acquisition Date: 12/23/2013) | | $ | 15,211,000 | | | $ | 16,643,126 | |
Eden Re II 2015-1 04/19/2018 (a)(e)(f)(g) (Cost: $0; Acquisition Date: 03/19/2015) | | | — | | | | 106,873 | |
Eden Re II 2016-1 04/23/2019 (a)(c)(e)(h) (Cost: $7,177,500; Acquisition Date: 12/30/2015) | | | 7,177,500 | | | | 7,881,680 | |
Sector Re V LTD Series 5 Class B 03/01/2020 (a)(f) (Cost: $24,530; Acquisition Date: 04/30/2015) | | | 24,530 | | | | 448,556 | |
Sector Re V LTD Series 5 Class F 03/01/2020 (a)(f) (Cost: $15,625; Acquisition Date: 04/27/2015) | | | 15,625 | | | | 351,811 | |
Sector Re V LTD Series 5 Class G 03/01/2020 (a)(f) (Cost: $11,468; Acquisition Date: 06/26/2015) | | | 11,468 | | | | 412,365 | |
Sector Re V LTD Series 6 Class B 03/01/2021 (a)(f)(h) (Cost: $6,985,067; Acquisition Date: 04/28/2016) | | | 6,985,067 | | | | 7,437,699 | |
Sector Re V LTD Series 6 Class G 03/01/2021 (a)(f)(h) (Cost: $8,211,945; Acquisition Date: 04/28/2016) | | | 8,211,945 | | | | 8,661,138 | |
| | | | | | | | |
TOTAL PARTICIPATION NOTES
(Cost $37,637,135) | | | | | | | 41,943,248 | |
| | | | | | | | |
| | |
| | | SHARES | | | FAIR
VALUE | |
PREFERENCE SHARES - 10.3% | | | | | | | | |
| | | | | | | | |
Global - 10.3% | | | | | | | | |
| | | | | | | | |
| Multiperil - 10.3% | | | | | | |
Arenal (Artex Segregated Account Company) (a)(e)(f) (Cost: $12,589,776; Acquisition Date: 05/07/2015) | | | 12,590 | | | | 15,146,874 | |
Biscayne (Artex Segregated Account Company) (a)(e)(f) (Cost: $10,874,225; Original Acquisition Date: 04/30/2014) | | | 10,896 | | | | 12,551,097 | |
Hilo (Artex Segregated Account Company) (a)(e)(f)(h) (Cost: $1,181,950; Acquisition Date: 06/09/2015) | | | 1,182 | | | | 1,418,984 | |
Hudson Charles 2 (Mt Logan Re) (a)(f) (Cost: $3,472,000; Acquisition Date: 04/02/2014) | | | 3,472 | | | | 3,719,568 | |
| | | | |
| | The accompanying footnotes are an integral part of these Schedules of Investments. | | (Continued) |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
36
| | |
| Schedule of Investments | | October 31, 2016 |
| | | | |
| STONE RIDGE HIGH YIELD REINSURANCE RISK PREMIUM FUND | | | | |
| | | | | | | | |
| | |
| | | SHARES | | | FAIR
VALUE | |
| Multiperil - 10.3% (continued) | | | | | | |
Hudson Charles 3 (Mt Logan Re) (a)(f) (Cost: $3,446,000; Acquisition Date: 06/19/2014) | | | 3,446 | | | $ | 3,692,755 | |
Hudson Paul 3 (Mt Logan Re) (a)(f) (Cost: $3,472,000; Acquisition Date: 04/02/2014) | | | 3,472 | | | | 3,759,180 | |
Kona (Artex Segregated Account Company) (a)(e)(f)(h) (Cost: $400,958; Acquisition Date: 07/23/2015) | | | 450 | | | | 507,260 | |
LRe 2015 (a)(e)(f) (Cost: $10,896; Acquisition Date: 03/31/2015) | | | 109 | | | | 206,937 | |
Minnewaska (Artex Segregated Account Company) (a)(e)(f)(h) (Cost: $1,793,421; Original Acquisition Date: 05/29/2015) | | | 1,540 | | | | 2,281,519 | |
Rondout (Artex Segregated Account Company) (a)(e)(f) (Cost: $3,300,563; Acquisition Date: 05/29/2015) | | | 2,913 | | | | 3,908,448 | |
Yoho (Artex Segregated Account Company) (a)(e)(f)(h) (Cost: $3,730,000; Acquisition Date: 05/17/2016) | | | 3,730 | | | | 3,912,952 | |
| | | | | | | | |
TOTAL PREFERENCE SHARES
(Cost $44,271,789) | | | | | | | 51,105,574 | |
| | | | | | | | |
| | | | | | | | |
SHORT-TERM INVESTMENTS - 0.0% | | | | | | | | |
| | | | | | | | |
| Money Market Fund - 0.0% | | | | | | |
Fidelity Institutional Money Market Funds - Government Portfolio - Institutional Class - 0.27% (i) | | | 55,381 | | | | 55,381 | |
First American Government Obligations Fund - Class Z - 0.24% (i) | | | 55,380 | | | | 55,380 | |
First American Treasury Obligations Fund - Class Z - 0.22% (i) | | | 55,380 | | | | 55,380 | |
| | | | | | | | |
| | |
| | | SHARES | | | FAIR
VALUE | |
| Money Market Fund - 0.0% (continued) | | | | | | |
Short-Term Investments Trust - Treasury Portfolio - Institutional Class - 0.21% (i) | | | 55,380 | | | $ | 55,380 | |
| | | | | | | | |
TOTAL SHORT-TERM INVESTMENTS
(Cost $221,521) | | | | | | | 221,521 | |
| | | | | | | | |
TOTAL INVESTMENTS
(Cost $477,237,041) - 100.0% | | | | | | | 497,929,817 | |
| | | | | | | | |
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.0% | | | | | | | 50,566 | |
| | | | | | | | |
TOTAL NET ASSETS - 100.0% | | | | | | $ | 497,980,383 | |
| | | | | | | | |
Principal amounts stated in U.S. dollars unless otherwise stated.
Country shown is geographic area of peril risk.
Percentages are stated as a percent of net assets.
| (a) | Foreign issued security. Total foreign securities by country of domicile are $488,103,028. Foreign concentration is as follows: Bermuda: 77.9%, Cayman Islands: 17.3%, Ireland: 2.8%. |
| (b) | Variable rate security. The rate shown is as of October 31, 2016. |
| (c) | Security is restricted to resale to institutional investors. The Fund’s Adviser has deemed this security to be liquid based upon procedures approved by the Board of Trustees. The aggregate value of these securities at October 31, 2016 was $429,184,280, which represents 86.2% of net assets. |
| (d) | Zero-coupon bond. The rate shown is the yield to maturity. |
| (e) | Security is fair valued by the Adviser pursuant to procedures approved by the Board of Trustees. The aggregate value of these securities is $64,565,750, which represents 13.0% of net assets. |
| (f) | Security is restricted to resale. The aggregate value of these securities at October 31, 2016 was $68,524,016, which represents 13.8% of net assets. |
| (g) | Security’s principal was returned in full so the fair value represents the expected future dividend receipt. |
| (h) | Non-income producing security. |
| (i) | Rate shown is the 7-day effective yield. |
| (j) | All or a portion of these securities are held as collateral as part of the Fund’s financing facility. |
Open Futures Contracts
| | | | | | | | | | | | |
| DESCRIPTION | | NUMBER OF
CONTRACTS SOLD | | | NOTIONAL
VALUE | | | UNREALIZED
APPRECIATION | |
| | | |
| FUTURES CONTRACTS SOLD | | | | | | | | | |
Swiss Franc, December 2016 Settlement | | | 12 | | | $ | 1,518,300 | | | $ | 36,725 | |
U.S. Treasury 5-Year Note, December 2016 Settlement | | | 50 | | | | 6,039,844 | | | | 22,976 | |
| | | | | | | | | | | | |
TOTAL FUTURES CONTRACTS SOLD | | | | | | $ | 7,558,144 | | | $ | 59,701 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| DESCRIPTION | | NUMBER OF
CONTRACTS PURCHASED | | | NOTIONAL
VALUE | | | UNREALIZED
DEPRECIATION | |
| | | |
| FUTURES CONTRACTS PURCHASED | | | | | | | | | |
Canadian Dollar, December 2016 Settlement | | | 6 | | | $ | 447,150 | | | $ | (20,533) | |
| | | | | | | | | | | | |
TOTAL FUTURES CONTRACTS PURCHASED | | | | | | $ | 447,150 | | | $ | (20,533) | |
| | | | | | | | | | | | |
| | | | |
| | The accompanying footnotes are an integral part of these Schedules of Investments. | | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
37
| | |
| Schedule of Investments | | October 31, 2016 |
| | | | |
| STONE RIDGE U.S. LARGE CAP VARIANCE RISK PREMIUM FUND | | | | |
| | | | | | | | |
| | | SHARES | | | FAIR
VALUE | |
| CONTINGENT VALUE RIGHTS - 0.0% | |
|
| Food Staples Retailing - 0.0% | |
Safeway Casa Ley (a)(b)(c) (Cost: $0; Original Acquisition Date: 05/14/2013) | | | 5,400 | | | $ | 5,480 | |
Safeway PDC (a)(b)(c) (Cost: $0; Original Acquisition Date: 05/14/2013) | | | 5,400 | | | | 264 | |
| | | | | | | | |
TOTAL CONTINGENT VALUE RIGHTS
(Cost $0) | | | | | | | 5,744 | |
| | | | | | | | |
| | | | | | | | |
SHORT-TERM INVESTMENTS - 100.7% | |
| | | | | | | | |
| Money Market Funds - 0.1% | |
Fidelity Institutional Money Market Funds -Government Portfolio -Institutional Class -0.27% (d) | | | 138,486 | | | | 138,486 | |
First American Government Obligations Fund -Class Z -0.24% (d) | | | 138,486 | | | | 138,486 | |
First American Treasury Obligations Fund - Class Z -0.22% (d) | | | 138,485 | | | | 138,485 | |
Short-Term Investments Trust -Treasury Portfolio -Institutional
Class - 0.21% (d) | | | 138,486 | | | | 138,486 | |
| | | | | | | | |
| | | | | | | 553,943 | |
| | | | | | | | |
| | |
| | | PRINCIPAL
AMOUNT | | | FAIR
VALUE | |
| U.S. Treasury Bills - 100.6% | |
0.283%, 11/10/2016 (e)(f) | | $ | 59,000,000 | | | | 58,995,863 | |
0.278%, 12/08/2016 (e)(f) | | | 17,800,000 | | | | 17,794,953 | |
0.377%, 01/26/2017 (e)(f) | | | 63,300,000 | | | | 63,254,804 | |
0.365%, 02/02/2017 (e)(f) | | | 33,450,000 | | | | 33,420,898 | |
0.420%, 02/09/2017 (e)(f) | | | 9,900,000 | | | | 9,891,130 | |
| | | | | | | | |
| | |
| | | PRINCIPAL
AMOUNT | | | FAIR
VALUE | |
| U.S. Treasury Bills - 100.6% (continued) | |
0.430%, 02/16/2017 (e)(f) | | $ | 47,100,000 | | | $ | 47,054,643 | |
0.450%, 02/23/2017 (e)(f) | | | 29,050,000 | | | | 29,020,340 | |
0.438%, 03/02/2017 (e)(f) | | | 600,000 | | | | 599,304 | |
0.544%, 08/17/2017 (e)(f) | | | 36,600,000 | | | | 36,438,557 | |
0.599%, 09/14/2017 (e)(f) | | | 48,500,000 | | | | 48,250,370 | |
0.634%, 10/12/2017 (e)(f) | | | 37,000,000 | | | | 36,775,299 | |
| | | | | | | | |
| | | | | | | 381,496,161 | |
| | | | | | | | |
TOTAL SHORT-TERM INVESTMENTS
(Cost $382,014,685) | | | | 382,050,104 | |
| | | | | | | | |
TOTAL INVESTMENTS
(Cost $382,014,685) - 100.7% | | | | 382,055,848 | |
| | | | | | | | |
LIABILITIES IN EXCESS OF OTHER
ASSETS - (0.7)% | | | | (2,830,639) | |
| | | | | | | | |
TOTAL NET ASSETS - 100.0% | | | $ | 379,225,209 | |
| | | | | | | | |
Percentages are stated as a percent of net assets.
| (a) | Non-income producing security. |
| (b) | Security is restricted to resale. The aggregate value of these securities at October 31, 2016 was $5,744, which represents 0.0% of net assets. |
| (c) | Security is fair valued by the Adviser pursuant to procedures approved by the Board of Trustees. The aggregate value of these securities is $5,744, which represents 0.0% of net assets. |
| (d) | Rate shown is the 7-day effective yield. |
| (e) | Rate shown is the effective yield based on purchase price. The calculation assumes the security is held to maturity. |
| (f) | All or portion of this security is held as collateral for written put options. |
Written Options
| | | | | | | | |
| DESCRIPTION | | NUMBER OF
CONTRACTS | | | FAIR VALUE | |
| | |
| PUT OPTIONS | | | | | | |
CBOE S&P 500 Index, Expires 11/02/2016, Strike Price $2120.00 | | | 381 | | | $ | 203,835 | |
CBOE S&P 500 Index, Expires 11/02/2016, Strike Price $2125.00 | | | 147 | | | | 102,165 | |
CBOE S&P 500 Index, Expires 11/02/2016, Strike Price $2135.00 | | | 82 | | | | 93,070 | |
CBOE S&P 500 Index, Expires 11/02/2016, Strike Price $2140.00 | | | 65 | | | | 92,950 | |
CBOE S&P 500 Index, Expires 11/04/2016, Strike Price $2125.00 | | | 275 | | | | 312,675 | |
CBOE S&P 500 Index, Expires 11/04/2016, Strike Price $2130.00 | | | 300 | | | | 402,600 | |
CBOE S&P 500 Index, Expires 11/07/2016, Strike Price $2120.00 | | | 148 | | | | 192,400 | |
CBOE S&P 500 Index, Expires 11/07/2016, Strike Price $2125.00 | | | 170 | | | | 232,900 | |
CBOE S&P 500 Index, Expires 11/07/2016, Strike Price $2130.00 | | | 50 | | | | 78,500 | |
NASDAQ 100 Index, Expires 11/04/2016, Strike Price $4820.00 | | | 20 | | | | 74,100 | |
NASDAQ 100 Index, Expires 11/04/2016, Strike Price $4825.00 | | | 10 | | | | 39,950 | |
NASDAQ 100 Index, Expires 11/04/2016, Strike Price $4830.00 | | | 10 | | | | 43,000 | |
| | | | | | | | |
TOTAL PUT OPTIONS
(Premiums Received $2,128,608) | | | | | | | 1,868,145 | |
| | | | | | | | |
TOTAL WRITTEN OPTIONS
(Premiums Received $2,128,608) | | | | | | $ | 1,868,145 | |
| | | | | | | | |
| | | | |
| | The accompanying footnotes are an integral part of these Schedules of Investments. | | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
38
| | |
| Schedule of Investments | | October 31, 2016 |
| | | | |
| STONE RIDGE U.S. SMALL CAP VARIANCE RISK PREMIUM FUND | | | | |
| | | | | | | | |
| | | SHARES | | | FAIR
VALUE | |
CONTINGENT VALUE RIGHTS - 0.0% | |
| | | | | | | | |
| Pharmaceuticals, Biotechnology & Life Sciences - 0.0% | |
Trius Therapeutics, Inc. (a)(b)(c) (Cost: $0; Acquisition Date: 08/12/2013) | | | 3,300 | | | $ | — | |
| | | | | | | | |
| Telecommunication Services - 0.0% | |
Leap Wireless International, Inc. (a)(b)(c) (Cost: $6,396; Acquisition Date: 08/12/2013) | | | 2,700 | | | | 6,804 | |
| | | | | | | | |
TOTAL CONTINGENT VALUE RIGHTS
(Cost $6,396) | | | | | 6,804 | |
| | | | | | | | |
| | |
| | | PRINCIPAL
AMOUNT | | | FAIR
VALUE | |
SHORT-TERM INVESTMENTS - 100.6% | |
| | | | | | | | |
| U.S. Treasury Bills - 100.6% | |
0.283%, 11/10/2016 (d)(e) | | $ | 11,550,000 | | | | 11,549,190 | |
0.284%, 12/08/2016 (d)(e) | | | 9,800,000 | | | | 9,797,158 | |
0.369%, 01/26/2017 (d)(e) | | | 11,300,000 | | | | 11,291,932 | |
0.362%, 02/02/2017 (d)(e) | | | 23,800,000 | | | | 23,779,294 | |
0.433%, 02/09/2017 (d)(e) | | | 400,000 | | | | 399,642 | |
0.430%, 02/16/2017 (d)(e) | | | 4,550,000 | | | | 4,545,618 | |
0.450%, 02/23/2017 (d)(e) | | | 7,800,000 | | | | 7,792,036 | |
0.413%, 03/02/2017 (d)(e) | | | 1,400,000 | | | | 1,398,376 | |
0.544%, 08/17/2017 (d)(e) | | | 22,300,000 | | | | 22,201,635 | |
| | | | | | | | |
| | | PRINCIPAL
AMOUNT | | | FAIR
VALUE | |
| U.S. Treasury Bills - 100.6% (continued) | |
0.599%, 09/14/2017 (d)(e) | | $ | 22,200,000 | | | $ | 22,085,737 | |
0.634%, 10/12/2017 (d)(e) | | | 14,300,000 | | | | 14,213,156 | |
| | | | | | | | |
TOTAL SHORT-TERM INVESTMENTS (Cost $129,049,008) | | | | | | | 129,053,774 | |
| | | | | | | | |
TOTAL INVESTMENTS
(Cost $129,055,404) - 100.6% | | | | | | | 129,060,578 | |
| | | | | | | | |
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.6)% | | | | | | | (773,301) | |
| | | | | | | | |
TOTAL NET ASSETS - 100.0% | | | | | | $ | 128,287,277 | |
| | | | | | | | |
Percentages are stated as a percent of net assets.
| (a) | Non-income producing security. |
| (b) | Security is restricted to resale. The aggregate value of these securities at October 31, 2016 was $6,804, which represents 0.0% of net assets. |
| (c) | Security is fair valued by the Adviser pursuant to procedures approved by the Board of Trustees. The aggregate value of these securities is $6,804, which represents 0.0% of net assets. |
| (d) | All or a portion of this security is held as collateral for written put options. |
| (e) | Rate shown is the effective yield based on purchase price. The calculation assumes the security is held to maturity. |
Written Options
| | | | | | | | |
| DESCRIPTION | | NUMBER OF
CONTRACTS | | | FAIR
VALUE | |
| | |
PUT OPTIONS | | | | | | | | |
CBOE Russell 2000 Index, Expires 11/04/2016, Strike Price $1185.00 | | | 375 | | | $ | 228,750 | |
CBOE Russell 2000 Index, Expires 11/04/2016, Strike Price $1190.00 | | | 558 | | | | 432,450 | |
CBOE Russell 2000 Index, Expires 11/04/2016, Strike Price $1195.00 | | | 100 | | | | 98,000 | |
| | | | | | | | |
TOTAL PUT OPTIONS
(Premiums Received $1,233,450) | | | | | | | 759,200 | |
| | | | | | | | |
TOTAL WRITTEN OPTIONS
(Premiums Received $1,233,450) | | | | | | $ | 759,200 | |
| | | | | | | | |
| | | | |
| | The accompanying footnotes are an integral part of these Schedules of Investments. | | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
39
| | |
| Schedule of Investments | | October 31, 2016 |
| | | | |
| STONE RIDGE U.S. VARIANCE RISK PREMIUM MASTER FUND | | | | |
| | | | | | | | |
| | | SHARES | | | FAIR
VALUE | |
INVESTMENT COMPANIES - 100.1% | | | | | |
| | | | | | | | |
| Open-End Mutual Funds - 100.1% | |
Stone Ridge U.S. Large Cap Variance Risk Premium Fund - Class I (a) | | | 13,510,250 | | | $ | 142,938,445 | |
Stone Ridge U.S. Small Cap Variance Risk Premium Fund - Class I (a) | | | 7,010,409 | | | | 70,735,027 | |
| | | | | | | | |
TOTAL INVESTMENT COMPANIES
(Cost $206,723,187) | | | | | | | 213,673,472 | |
| | | | | | | | |
| | | | | | | | |
SHORT-TERM INVESTMENTS - 0.1% | |
| | | | | | | | |
| Money Market Funds - 0.1% | | | | | | |
Fidelity Institutional Money Market Funds - Government Portfolio - Institutional Class - 0.27% (b) | | | 55,929 | | | | 55,929 | |
First American Government Obligations Fund - Class Z - 0.24% (b) | | | 55,929 | | | | 55,929 | |
First American Treasury Obligations Fund - Class Z - 0.22% (b) | | | 55,928 | | | | 55,928 | |
Short Term Investments Trust - Treasury Portfolio - Institutional Class - 0.21% (b) | | | 55,929 | | | | 55,929 | |
| | | | | | | | |
TOTAL SHORT-TERM INVESTMENTS
(Cost $223,715) | | | | | | | 223,715 | |
| | | | | | | | |
TOTAL INVESTMENTS
(Cost $206,946,902) - 100.2% | | | | | | | 213,897,187 | |
| | | | | | | | |
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.2)% | | | | | | | (331,154) | |
| | | | | | | | |
TOTAL NET ASSETS - 100.0% | | | | | | $ | 213,566,033 | |
| | | | | | | | |
Percentages are stated as a percent of net assets.
| (a) | Affiliated company. See Footnote 10. |
| (b) | Rate shown is the 7-day effective yield. |
| | | | |
| | The accompanying footnotes are an integral part of these Schedules of Investments. | | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
40
| | |
| Schedule of Investments | | October 31, 2016 |
| | | | |
| STONE RIDGE INTERNATIONAL DEVELOPED MARKETS VARIANCE RISK PREMIUM FUND | | | | |
| | | | | | | | |
| | | SHARES | | | FAIR
VALUE | |
SHORT-TERM INVESTMENTS - 101.2% | |
| | | | | | | | |
| Money Market Funds - 7.4% | |
Fidelity Institutional Money Market Funds - Government Portfolio - Institutional Class - 0.27% (a) | | | 1,792,705 | | | $ | 1,792,705 | |
First American Government Obligations Fund - Class Z - 0.24% (a) | | | 1,792,704 | | | | 1,792,704 | |
First American Treasury Obligations Fund - Class Z - 0.22% (a) | | | 1,792,704 | | | | 1,792,704 | |
Short-Term Investments Trust - Treasury Portfolio - Institutional Class - 0.21% (a) | | | 1,792,705 | | | | 1,792,705 | |
| | | | | | | | |
| | | | | | | 7,170,818 | |
| | | | | | | | |
| | |
| | | PRINCIPLE
AMOUNT | | | FAIR
VALUE | |
| U.S. Treasury Bills - 93.8% | |
0.283%, 11/10/2016 (b)(c) | | $ | 13,100,000 | | | | 13,099,081 | |
0.268%, 12/08/2016 (b)(c) | | | 6,250,000 | | | | 6,248,298 | |
0.369%, 01/26/2017 (b)(c) | | | 7,250,000 | | | | 7,244,823 | |
0.359%, 02/02/2017 (b)(c) | | | 2,100,000 | | | | 2,098,173 | |
0.455%, 03/02/2017 (b)(c) | | | 2,000,000 | | | | 1,997,680 | |
0.433%, 04/27/2017 (b)(c) | | | 11,000,000 | | | | 10,973,633 | |
0.439%, 05/25/2017 (b)(c) | | | 11,000,000 | | | | 10,970,718 | |
0.438%, 06/22/2017 (b)(c) | | | 10,000,000 | | | | 9,968,210 | |
| | | | | | | | |
| | | PRINCIPLE
AMOUNT | | | FAIR
VALUE | |
| U.S. Treasury Bills - 93.8% (continued) | |
0.530%, 07/20/2017 (b)(c) | | $ | 10,000,000 | | | $ | 9,955,890 | |
0.571%, 08/17/2017 (b)(c) | | | 10,000,000 | | | | 9,961,390 | |
0.600%, 09/14/2017 (b)(c) | | | 4,200,000 | | | | 4,178,383 | |
0.633%, 10/12/2017 (b)(c) | | | 4,100,000 | | | | 4,075,101 | |
| | | | | | | | |
| | | | | | | 90,771,380 | |
| | | | | | | | |
TOTAL SHORT-TERM INVESTMENTS
(Cost $97,948,820) | | | | | | | 97,942,198 | |
| | | | | | | | |
TOTAL INVESTMENTS
(Cost $97,948,820) - 101.2% | | | | | | | 97,942,198 | |
| | | | | | | | |
LIABILITIES IN EXCESS OF OTHER ASSETS - (1.2)% | | | | | | | (1,128,470) | |
| | | | | | | | |
TOTAL NET ASSETS - 100.0% | | | | | | $ | 96,813,728 | |
| | | | | | | | |
Percentages are stated as a percent of net assets.
| (a) | Rate shown is the 7-day effective yield |
| (b) | All or a portion of this security is held as collateral for written put options. |
| (c) | Rate shown is the effective yield based on purchase price. The calculation assumes the security is held to maturity. |
Written Options
| | | | | | | | |
| DESCRIPTION | | NUMBER OF
CONTRACTS | | | FAIR VALUE | |
| | |
PUT OPTIONS | | | | | | | | |
CAC 40 Index, Expires 11/18/2016, Strike Price EUR 4500.00 | | | 98 | | | $ | 78,576 | |
CAC 40 Index, Expires 11/18/2016, Strike Price EUR 4525.00 | | | 1 | | | | 917 | |
Eurex DAX, Expires 11/04/2016, Strike Price EUR 10650.00 | | | 20 | | | | 7,124 | |
Eurex DAX, Expires 11/04/2016, Strike Price EUR 10700.00 | | | 146 | | | | 69,238 | |
Euro Stoxx 50 Index, Expires 11/04/2016, Strike Price EUR 3050.00 | | | 100 | | | | 20,638 | |
Euro Stoxx 50 Index, Expires 11/04/2016, Strike Price EUR 3075.00 | | | 479 | | | | 156,696 | |
FTSE 100 Index, Expires 11/18/2016, Strike Price GBP 6875.00 | | | 80 | | | | 67,076 | |
FTSE 100 Index, Expires 11/18/2016, Strike Price GBP 6950.00 | | | 84 | | | | 101,274 | |
FTSE 100 Index, Expires 11/18/2016, Strike Price GBP 7025.00 | | | 40 | | | | 67,810 | |
FTSE 100 Index, Expires 11/18/2016, Strike Price GBP 7050.00 | | | 24 | | | | 45,239 | |
Hang Seng Index, Expires 11/29/2016, Strike Price HKD 23000.00 | | | 16 | | | | 50,029 | |
Nikkei-225 Stock Index, Expires 11/11/2016, Strike Price JPY 17125.00 | | | 100 | | | | 100,124 | |
Nikkei-225 Stock Index, Expires 11/11/2016, Strike Price JPY 17250.00 | | | 48 | | | | 64,079 | |
S&P/ASX 200 Index, Expires 11/17/2016, Strike Price AUD 5250.00 | | | 56 | | | | 21,640 | |
S&P/ASX 200 Index, Expires 11/17/2016, Strike Price AUD 5400.00 | | | 100 | | | | 102,390 | |
S&P/ASX 200 Index, Expires 11/17/2016, Strike Price AUD 5450.00 | | | 25 | | | | 33,376 | |
Swiss Market Index, Expires 11/18/2016, Strike Price CHF 7850.00 | | | 23 | | | | 26,939 | |
Swiss Market Index, Expires 11/18/2016, Strike Price CHF 7900.00 | | | 99 | | | | 140,864 | |
| | | | | | | | |
TOTAL PUT OPTIONS
(Premiums Received $1,109,698) | | | | | | | 1,154,029 | |
| | | | | | | | |
TOTAL WRITTEN OPTIONS
(Premiums Received $1,109,698) | | | | | | $ | 1,154,029 | |
| | | | | | | | |
| | | | |
| | The accompanying footnotes are an integral part of these Schedules of Investments. | | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
41
| | |
| Schedule of Investments | | October 31, 2016 |
| | | | |
| STONE RIDGE EMERGING MARKETS VARIANCE RISK PREMIUM FUND | | | | |
| | | | | | | | |
| | | SHARES | | | FAIR
VALUE | |
SHORT-TERM INVESTMENTS - 101.6% | |
| | | | | | | | |
| Money Market Funds - 0.1% | |
Fidelity Institutional Money Market Funds - Government Portfolio - Institutional Class - 0.27% (a) | | | 7,634 | | | $ | 7,634 | |
First American Government Obligations Fund - Class Z - 0.24% (a) | | | 7,635 | | | | 7,635 | |
First American Treasury Obligations Fund - Class Z - 0.22% (a) | | | 7,634 | | | | 7,634 | |
Short-Term Investments Trust - Treasury Portfolio - Institutional Class - 0.21% (a) | | | 7,635 | | | | 7,635 | |
| | | | | | | | |
| | | | | | | 30,538 | |
| | | | | | | | |
| | |
| | | PRINCIPAL
AMOUNT | | | FAIR
VALUE | |
| U.S. Treasury Bills - 101.5% | |
0.285%, 11/10/2016 (b)(c) | | $ | 2,100,000 | | | | 2,099,852 | |
0.275%, 12/08/2016 (b)(c) | | | 8,000,000 | | | | 7,997,759 | |
0.369%, 01/26/2017 (b)(c) | | | 2,500,000 | | | | 2,498,215 | |
0.364%, 02/02/2017 (b)(c) | | | 9,950,000 | | | | 9,941,343 | |
0.430%, 02/16/2017 (b)(c) | | | 2,250,000 | | | | 2,247,833 | |
0.449%, 02/23/2017 (b)(c) | | | 4,950,000 | | | | 4,944,946 | |
0.435%, 03/02/2017 (b)(c) | | | 300,000 | | | | 299,652 | |
| | | | | | | | |
| | | PRINCIPAL
AMOUNT | | | FAIR
VALUE | |
| U.S. Treasury Bills - 101.5% (continued) | |
0.544%, 08/17/2017 (b)(c) | | $ | 5,000,000 | | | $ | 4,977,945 | |
0.202%, 09/02/2017 (b)(c) | | | 200,000 | | | | 199,821 | |
0.600%, 09/14/2017 (b)(c) | | | 6,900,000 | | | | 6,864,486 | |
0.634%, 10/12/2017 (b)(c) | | | 7,400,000 | | | | 7,355,060 | |
| | | | | | | | |
| | | | | | | 49,426,912 | |
| | | | | | | | |
TOTAL SHORT-TERM INVESTMENTS
(Cost $49,454,750) | | | | | | | 49,457,450 | |
| | | | | | | | |
TOTAL INVESTMENTS
(Cost $49,454,750) - 101.6% | | | | | | | 49,457,450 | |
| | | | | | | | |
LIABILITIES IN EXCESS OF OTHER ASSETS - (1.6)% | | | | | | | (753,059) | |
| | | | | | | | |
TOTAL NET ASSETS - 100.0% | | | | | | $ | 48,704,391 | |
| | | | | | | | |
Percentages are stated as a percent of net assets.
| (a) | Rate shown is the 7-day effective yield. |
| (b) | All or a portion of this security is held as collateral for written put options. |
| (c) | Rate shown is the effective yield based on purchased price. The calculation assumes the security is held to maturity. |
Written Options
| | | | | | | | |
| DESCRIPTION | | NUMBER OF
CONTRACTS | | | FAIR VALUE | |
| | |
PUT OPTIONS | | | | | | | | |
iShares China Large-Cap ETF, Expires 11/04/2016, Strike Price $37.00 | | | 500 | | | $ | 21,000 | |
iShares MSCI Brazil Capped ETF, Expires 11/04/2016, Strike Price $37.00 | | | 340 | | | | 8,670 | |
iShares MSCI Brazil Capped ETF, Expires 11/18/2016, Strike Price $37.50 | | | 160 | | | | 14,960 | |
iShares MSCI Emerging Markets ETF, Expires 11/04/2016, Strike Price $36.50 | | | 135 | | | | 1,822 | |
iShares MSCI Emerging Markets ETF, Expires 11/04/2016, Strike Price $37.00 | | | 5,930 | | | | 160,110 | |
iShares MSCI Emerging Markets ETF, Expires 11/04/2016, Strike Price $37.50 | | | 1,657 | | | | 82,850 | |
iShares MSCI Emerging Markets ETF, Expires 11/11/2016, Strike Price $36.50 | | | 130 | | | | 5,395 | |
iShares MSCI Emerging Markets ETF, Expires 11/11/2016, Strike Price $37.50 | | | 755 | | | | 63,043 | |
iShares MSCI Emerging Markets ETF, Expires 11/18/2016, Strike Price $37.00 | | | 718 | | | | 50,260 | |
iShares MSCI Emerging Markets ETF, Expires 11/18/2016, Strike Price $37.50 | | | 1,673 | | | | 155,589 | |
iShares MSCI Mexico Capped ETF, Expires 11/18/2016, Strike Price $52.00 | | | 250 | | | | 62,250 | |
iShares MSCI South Korea ETF, Expires 11/18/2016, Strike Price $56.00 | | | 150 | | | | 22,500 | |
Market Vectors Russia ETF, Expires 11/18/2016, Strike Price $18.00 | | | 150 | | | | 3,750 | |
| | | | | | | | |
TOTAL PUT OPTIONS
(Premiums Received $642,765) | | | | | | | 652,199 | |
| | | | | | | | |
TOTAL WRITTEN OPTIONS
(Premiums Received $642,765) | | | | | | $ | 652,199 | |
| | | | | | | | |
| | | | |
| | The accompanying footnotes are an integral part of these Schedules of Investments. | | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
42
| | |
| Schedule of Investments | | October 31, 2016 |
| | | | |
| STONE RIDGE INTERNATIONAL VARIANCE RISK PREMIUM MASTER FUND | | | | |
| | | | | | | | |
| | | SHARES | | | FAIR
VALUE | |
INVESTMENT COMPANIES - 99.7% | | | | | |
| | | | | | | | |
| Open-End Mutual Funds - 99.7% | | | | | | |
Stone Ridge Emerging Markets Variance Risk Premium Fund - Class I (a) | | | 434,934 | | | $ | 3,940,499 | |
Stone Ridge International Developed Markets Variance Risk Premium Fund - Class I (a) | | | 806,654 | | | | 7,808,414 | |
| | | | | | | | |
TOTAL INVESTMENT COMPANIES
(Cost $11,694,407) | | | | | | | 11,748,913 | |
| | | | | | | | |
| | | | | | | | |
| SHORT-TERM INVESTMENTS - 0.6% | |
| | | | | | | | |
| Money Market Funds - 0.6% | |
Fidelity Institutional Money Market Funds - Government Portfolio - Institutional
Class - 0.27% (b) | | | 19,236 | | | | 19,236 | |
First American Government Obligations
Fund - Class Z - 0.24% (b) | | | 19,235 | | | | 19,235 | |
First American Treasury Obligations Fund - Class Z - 0.22% (b) | | | 19,235 | | | | 19,235 | |
Short-Term Investments Trust - Treasury Portfolio - Institutional Class - 0.21% (b) | | | 19,236 | | | | 19,236 | |
| | | | | | | | |
TOTAL SHORT-TERM INVESTMENTS
(Cost $76,942) | | | | | | | 76,942 | |
| | | | | | | | |
TOTAL INVESTMENTS
(Cost $11,771,349) - 100.3% | | | | | | | 11,825,855 | |
| | | | | | | | |
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.3)% | | | | | | | (38,715) | |
| | | | | | | | |
TOTAL NET ASSETS - 100.0% | | | | | | $ | 11,787,140 | |
| | | | | | | | |
Percentages are stated as a percent of net assets.
| (a) | Affiliated company. See Footnote 10. |
| (b) | Rate shown is the 7-day effective yield. |
| | | | |
| | The accompanying footnotes are an integral part of these Schedules of Investments. | | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
43
| | |
| Schedule of Investments | | October 31, 2016 |
| | | | |
| STONE RIDGE GLOBAL EQUITY VARIANCE RISK PREMIUM MASTER FUND | | | | |
| | | | | | | | |
| | | SHARES | | | FAIR
VALUE | |
INVESTMENT COMPANIES - 99.7% | | | | | |
| | | | | | | | |
| Open-End Mutual Funds - 99.7% | | | | | | |
Stone Ridge Emerging Markets Variance Risk Premium Fund - Class I (a) | | | 745,149 | | | $ | 6,751,049 | |
Stone Ridge International Developed Markets Variance Risk Premium Fund - Class I (a) | | | 1,405,771 | | | | 13,607,866 | |
Stone Ridge U.S. Large Cap Variance Risk Premium Fund - Class I (a) | | | 1,284,355 | | | | 13,588,476 | |
Stone Ridge U.S. Small Cap Variance Risk Premium Fund - Class I (a) | | | 662,390 | | | | 6,683,515 | |
| | | | | | | | |
TOTAL INVESTMENT COMPANIES
(Cost $40,371,981) | | | | | | | 40,630,906 | |
| | | | | | | | |
| | | | | | | | |
SHORT-TERM INVESTMENTS - 0.6% | |
| | | | | | | | |
| Money Market Funds - 0.6% | |
Fidelity Institutional Money Market Funds - Government Portfolio - Institutional
Class - 0.27% (b) | | | 59,728 | | | | 59,728 | |
First American Government Obligations
Fund - Class Z - 0.24% (b) | | | 59,727 | | | | 59,727 | |
First American Treasury Obligations
Fund - Class Z - 0.22% (b) | | | 59,727 | | | | 59,727 | |
Short-Term Investments Trust - Treasury Portfolio - Institutional Class - 0.21% (b) | | | 59,727 | | | | 59,727 | |
| | | | | | | | |
TOTAL SHORT-TERM INVESTMENTS (Cost $238,909) | | | | | | | 238,909 | |
| | | | | | | | |
TOTAL INVESTMENTS
(Cost $40,610,890) - 100.3% | | | | | | | 40,869,815 | |
| | | | | | | | |
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.3)% | | | | | | | (104,904) | |
| | | | | | | | |
TOTAL NET ASSETS - 100.0% | | | | | | $ | 40,764,911 | |
| | | | | | | | |
Percentages are stated as a percent of net assets.
| (a) | Affiliated company. See Footnote 10. |
| (b) | Rate shown is the 7-day effective yield. |
| | | | |
| | The accompanying footnotes are an integral part of these Schedules of Investments. | | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
44
| | |
| Statement of Assets and Liabilities | | October 31, 2016 |
| | | | | | | | |
| | | STONE RIDGE
REINSURANCE
RISK PREMIUM
FUND | | | STONE RIDGE
HIGH YIELD
REINSURANCE
RISK PREMIUM
FUND | |
| ASSETS: | | | | | | | | |
Investments, at fair value(1) | | $ | 1,084,111,071 | | | $ | 497,929,817 | |
Interest receivable | | | 5,642,615 | | | | 3,052,924 | |
Dividends receivable | | | 14,833 | | | | — | |
Receivable from affiliates | | | — | | | | 916 | |
Receivable for fund shares sold | | | 68,093 | | | | 138,609 | |
Receivable for investments sold | | | 6,882,662 | | | | 3,281,468 | |
Foreign currencies, at value(2) | | | 581,334 | | | | 30,670 | |
Collateral held at broker | | | 633,967 | | | | 82,679 | |
Other assets | | | 22,689 | | | | 20,178 | |
| Total assets | | | 1,097,957,264 | | | | 504,537,261 | |
| LIABILITIES: | | | | | | | | |
Loan payable (See Note 12) | | | 36,000,000 | | | | 5,500,000 | |
Payable to Adviser | | | 1,378,602 | | | | 629,281 | |
Interest payable | | | 39,303 | | | | 10,879 | |
Payable for Chief Compliance Officer compensation | | | 1,393 | | | | 1,388 | |
Payable to Trustees | | | 19,806 | | | | 8,560 | |
Payable for fund shares redeemed | | | 271,252 | | | | 190,101 | |
Payable to Custodian | | | 17,395 | | | | 11,332 | |
Accrued distribution fees | | | 61,987 | | | | 18,901 | |
Other accrued expenses | | | 281,212 | | | | 186,436 | |
| Total liabilities | | | 38,070,950 | | | | 6,556,878 | |
| Total net assets | | $ | 1,059,886,314 | | | $ | 497,980,383 | |
| | | | | | | | | |
| NET ASSETS CONSIST OF: | | | | | | | | |
Capital stock | | $ | 1,022,513,330 | | | $ | 478,502,793 | |
Accumulated net investment income | | | 19,712,883 | | | | 6,867,145 | |
Accumulated net realized loss | | | (21,707,561 | ) | | | (8,120,934 | ) |
| Unrealized appreciation (depreciation) on: | | | | | | | | |
Investments | | | 39,699,481 | | | | 20,690,595 | |
Foreign currency translation | | | (937,048 | ) | | | 1,616 | |
Futures contracts | | | 605,229 | | | | 39,168 | |
| Total net assets | | $ | 1,059,886,314 | | | $ | 497,980,383 | |
| | | | | | | | | |
| Class I | | | | | | | | |
Net assets | | $ | 863,972,223 | | | $ | 434,268,630 | |
Shares outstanding | | | 82,903,235 | | | | 41,371,548 | |
Class I Net asset value, offering and redemption price per share | | $ | 10.42 | | | $ | 10.50 | |
| Class M | | | | | | | | |
Net assets | | $ | 195,914,091 | | | $ | 63,711,753 | |
Shares outstanding | | | 18,808,024 | | | | 6,072,312 | |
Class M Net asset value, offering and redemption price per share | | $ | 10.42 | | | $ | 10.49 | |
| | | | | | | | | |
(1) Cost of Investments | | $ | 1,045,337,071 | | | $ | 477,237,041 | |
(2) Cost of foreign currencies | | | 592,727 | | | | 31,196 | |
| | | | |
| | The accompanying notes are an integral part of these financial statements. | | (Continued) |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
45
| | |
| Statement of Assets and Liabilities | | October 31, 2016 |
| | | | | | | | | | | | |
| | | STONE RIDGE
U.S. LARGE CAP
VARIANCE
RISK PREMIUM
FUND | | | STONE RIDGE
U.S. SMALL CAP
VARIANCE
RISK PREMIUM
FUND | | | STONE RIDGE
U.S. VARIANCE
RISK PREMIUM
MASTER
FUND | |
| ASSETS: | | | | | | | | | | | | |
Investments, at fair value(1) | | | | | | | | | | | | |
Unaffiliated issuers | | $ | 382,055,848 | | | $ | 129,060,578 | | | $ | 223,715 | |
Affiliated issuers | | | — | | | | — | | | | 213,673,472 | |
Interest receivable | | | 69 | | | | 41 | | | | 39 | |
Receivable for investments sold | | | 1,515,829 | | | | 206,109 | | | | — | |
Collateral held at broker | | | — | | | | 683,574 | | | | — | |
Other assets | | | 13,922 | | | | 11,987 | | | | 20,461 | |
| Total assets | | | 383,585,668 | | | | 129,962,289 | | | | 213,917,687 | |
| LIABILITIES: | | | | | | | | | | | | |
Options written, at fair value(2) | | | 1,868,145 | | | | 759,200 | | | | — | |
Due to broker | | | 337 | | | | — | | | | — | |
Payable for investment securities purchased | | | 921,071 | | | | 452,819 | | | | — | |
Payable to Adviser | | | 402,305 | | | | 137,786 | | | | — | |
Payable for Chief Compliance Officer compensation | | | 1,405 | | | | 1,390 | | | | 325 | |
Payable to Trustees | | | 6,765 | | | | 2,376 | | | | — | |
Payable for fund shares redeemed | | | 923,032 | | | | 32,601 | | | | 253,998 | |
Payable to Custodian | | | 32,076 | | | | 176,557 | | | | 597 | |
Accrued distribution fees | | | 22,066 | | | | 4,307 | | | | 10,842 | |
Other accrued expenses | | | 183,257 | | | | 107,976 | | | | 85,892 | |
| Total liabilities | | | 4,360,459 | | | | 1,675,012 | | | | 351,654 | |
| Total net assets | | $ | 379,225,209 | | | $ | 128,287,277 | | | $ | 213,566,033 | |
| | | | | | | | | | | | | |
| NET ASSETS CONSIST OF: | | | | | | | | | | | | |
Capital stock | | $ | 363,177,850 | | | $ | 127,537,858 | | | $ | 197,480,936 | |
Accumulated net investment income (loss) | | | — | | | | (1,397,509 | ) | | | 663,366 | |
Accumulated net realized gain | | | 15,745,733 | | | | 1,667,504 | | | | 8,471,445 | |
| Unrealized appreciation on: | | | | | | | | | | | | |
Investments | | | 41,163 | | | | 5,174 | | | | 6,950,286 | |
Options written | | | 260,463 | | | | 474,250 | | | | — | |
| Total net assets | | $ | 379,225,209 | | | $ | 128,287,277 | | | $ | 213,566,033 | |
| | | | | | | | | | | | | |
| Class I | | | | | | | | | | | | |
Net assets | | $ | 311,316,567 | | | $ | 114,980,323 | | | $ | 180,870,328 | |
Shares outstanding | | | 29,430,293 | | | | 11,397,717 | | | | 16,840,690 | |
Class I Net asset value, offering and redemption price per share | | $ | 10.58 | | | $ | 10.09 | | | $ | 10.74 | |
| Class M | | | | | | | | | | | | |
Net assets | | $ | 67,908,642 | | | $ | 13,306,954 | | | $ | 32,695,705 | |
Shares outstanding | | | 6,457,512 | | | | 1,326,721 | | | | 3,053,904 | |
Class M Net asset value, offering and redemption price per share. | | $ | 10.52 | | | $ | 10.03 | | | $ | 10.71 | |
| | | | | | | | | | | | | |
(1) Cost of Investments | | | | | | | | | | | | |
Unaffiliated issuers | | $ | 382,014,685 | | | $ | 129,055,404 | | | $ | 223,715 | |
Affiliated issuers (See Note 10) | | | — | | | | — | | | | 206,723,187 | |
(2) Premiums received | | | 2,128,608 | | | | 1,233,450 | | | | — | |
| | | | |
| | The accompanying notes are an integral part of these financial statements. | | (Continued) |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
46
| | |
| Statement of Assets and Liabilities | | October 31, 2016 |
| | | | | | | | | | | | | | | | |
| | | STONE RIDGE
INTERNATIONAL
DEVELOPED
MARKETS VARIANCE
RISK PREMIUM FUND | | | STONE RIDGE
EMERGING MARKETS
VARIANCE RISK
PREMIUM FUND | | | STONE RIDGE
INTERNATIONAL
VARIANCE RISK
PREMIUM MASTER
FUND | | | STONE RIDGE
GLOBAL EQUITY
VARIANCE RISK
PREMIUM MASTER
FUND | |
| ASSETS: | | | | | | | | | | | | | | | | |
| Investments, at fair value(1) | | | | | | | | | | | | | | | | |
Unaffiliated issuers | | $ | 97,942,198 | | | $ | 49,457,450 | | | $ | 76,942 | | | $ | 238,909 | |
Affiliated issuers | | | — | | | | — | | | | 11,748,913 | | | | 40,630,906 | |
Interest receivable | | | 6,301 | | | | 24 | | | | 18 | | | | 39 | |
Dividends receivable | | | 156 | | | | — | | | | — | | | | — | |
Receivable from Adviser | | | — | | | | — | | | | 7,479 | | | | 3,290 | |
Receivable for investments sold | | | 122,257 | | | | — | | | | — | | | | — | |
Receivable for fund shares sold | | | — | | | | — | | | | — | | | | 2,480 | |
Foreign currencies, at value(2) | | | 639,584 | | | | — | | | | — | | | | — | |
Collateral held at broker | | | — | | | | 89,778 | | | | — | | | | — | |
Other assets | | | 14,466 | | | | 12,746 | | | | 11,373 | | | | 8,428 | |
| Total assets | | | 98,724,962 | | | | 49,559,998 | | | | 11,844,725 | | | | 40,884,052 | |
| LIABILITIES: | | | | | | | | | | | | | | | | |
Options written, at fair value(3) | | | 1,154,029 | | | | 652,199 | | | | — | | | | — | |
Due to broker | | | 502,740 | | | | — | | | | — | | | | — | |
Payable for investment interest | | | 22,625 | | | | — | | | | — | | | | — | |
Payable to Adviser | | | 102,420 | | | | 58,195 | | | | — | | | | — | |
Payable for Chief Compliance Officer compensation | | | 1,386 | | | | 1,386 | | | | 351 | | | | 324 | |
Payable to Trustees | | | 1,688 | | | | 823 | | | | — | | | | — | |
Payable for fund shares redeemed | | | 8,189 | | | | — | | | | — | | | | 55,511 | |
Payable to Custodian | | | 4,072 | | | | 51,302 | | | | 17 | | | | 196 | |
Accrued distribution fees | | | 6,885 | | | | 1,116 | | | | 1,836 | | | | 1,926 | |
Other accrued expenses | | | 107,200 | | | | 90,586 | | | | 55,381 | | | | 61,184 | |
| Total liabilities | | | 1,911,234 | | | | 855,607 | | | | 57,585 | | | | 119,141 | |
| Total net assets | | $ | 96,813,728 | | | $ | 48,704,391 | | | $ | 11,787,140 | | | $ | 40,764,911 | |
| | | | | | | | | | | | | | | | | |
| NET ASSETS CONSIST OF: | | | | | | | | | | | | | | | | |
Capital stock | | $ | 97,867,158 | | | $ | 51,950,730 | | | $ | 13,465,557 | | | $ | 40,303,494 | |
Accumulated net investment loss | | | (1,378,511 | ) | | | (478,377 | ) | | | (18,741 | ) | | | (86,052 | ) |
Accumulated net realized gain (loss) | | | 378,880 | | | | (2,761,229 | ) | | | (1,714,182 | ) | | | 288,543 | |
Unrealized appreciation (depreciation) on: | | | | | | | | | | | | | | | | |
Investments | | | (6,622 | ) | | | 2,700 | | | | 54,506 | | | | 258,926 | |
Foreign currency translation | | | (1,338 | ) | | | — | | | | — | | | | — | |
Options written | | | (45,839 | ) | | | (9,433 | ) | | | — | | | | — | |
| Total net assets | | $ | 96,813,728 | | | $ | 48,704,391 | | | $ | 11,787,140 | | | $ | 40,764,911 | |
| | | | | | | | | | | | | | | | | |
| Class I | | | | | | | | | | | | | | | | |
Net assets | | $ | 77,283,835 | | | $ | 45,163,774 | | | $ | 7,517,989 | | | $ | 33,413,501 | |
Shares outstanding | | | 7,980,402 | | | | 4,987,703 | | | | 790,364 | | | | 3,339,382 | |
Class I Net asset value, offering and redemption price per share | | $ | 9.68 | | | $ | 9.06 | | | $ | 9.51 | | | $ | 10.01 | |
| Class M | | | | | | | | | | | | | | | | |
Net assets | | $ | 19,529,893 | | | $ | 3,540,617 | | | $ | 4,269,151 | | | $ | 7,351,410 | |
Shares outstanding | | | 2,024,141 | | | | 392,505 | | | | 449,747 | | | | 736,471 | |
Class M Net asset value, offering and redemption price per share | | $ | 9.65 | | | $ | 9.02 | | | $ | 9.49 | | | $ | 9.98 | |
| | | | | | | | | | | | | | | | | |
| (1) Cost of Investments | | | | | | | | | | | | | | | | |
Unaffiliated issuers | | $ | 97,948,820 | | | $ | 49,454,750 | | | $ | 76,942 | | | $ | 238,909 | |
Affiliated issuers (See Note 10) | | | — | | | | — | | | | 11,694,407 | | | | 40,371,981 | |
(2) Cost of foreign currencies | | | 642,417 | | | | — | | | | — | | | | — | |
(3) Premiums received | | | 1,109,698 | | | | 642,765 | | | | — | | | | — | |
| | | | |
| | The accompanying notes are an integral part of these financial statements. | | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
47
| | |
| Statement of Operations | | For the Year Ended October 31, 2016 |
| | | | | | | | |
| | | STONE RIDGE
REINSURANCE
RISK PREMIUM
FUND | | | STONE RIDGE
HIGH YIELD
REINSURANCE
RISK PREMIUM
FUND | |
| INVESTMENT INCOME: | | | | | | | | |
Dividend income | | $ | 22,242,975 | | | $ | 10,013,091 | |
Interest income | | | 54,212,450 | | | | 27,021,142 | |
| Total investment income | | | 76,455,425 | | | | 37,034,233 | |
| EXPENSES | | | | | | | | |
Advisory fees (See Note 4) | | | 16,686,282 | | | | 7,518,507 | |
Fund accounting and administration fees | | | 568,564 | | | | 280,939 | |
Distribution (12b-1) fees — Class M Only | | | 315,065 | | | | 98,632 | |
Transfer agency fees and expenses | | | 185,973 | | | | 134,511 | |
Legal fees | | | 166,766 | | | | 76,447 | |
Custody fees | | | 86,976 | | | | 49,103 | |
Audit and tax related fees | | | 83,318 | | | | 83,318 | |
Federal and state registration fees | | | 76,268 | | | | 55,368 | |
Trustees fees and expenses | | | 69,905 | | | | 29,537 | |
Chief Compliance Officer compensation | | | 56,389 | | | | 56,389 | |
Interest expenses | | | 39,303 | | | | 28,264 | |
Other expenses | | | 252,474 | | | | 114,451 | |
| Total expenses | | | 18,587,283 | | | | 8,525,466 | |
| Net investment income | | | 57,868,142 | | | | 28,508,767 | |
| NET REALIZED AND UNREALIZED GAIN (LOSS): | | | | | | | | |
| Net realized gain (loss) on: | | | | | | | | |
Investments | | | (47,007 | ) | | | (148,756 | ) |
Foreign currency translation | | | (56,001 | ) | | | 608 | |
Futures contracts | | | (651,570 | ) | | | (194,917 | ) |
| Net increase from payments by affiliates: | | | — | | | | 916 | |
| Net change in unrealized appreciation on: | | | | | | | | |
Investments | | | 10,742,202 | | | | 4,224,946 | |
Foreign currency translation | | | 481,096 | | | | 1,616 | |
Futures contracts | | | 330,494 | | | | 50,804 | |
| Net realized and unrealized gain | | | 10,799,214 | | | | 3,935,217 | |
| Net increase in net assets resulting from operations | | $ | 68,667,356 | | | $ | 32,443,984 | |
| | | | | | | | | |
| | | | |
| | The accompanying notes are an integral part of these financial statements. | | (Continued) |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
48
| | |
| Statement of Operations | | For the Year Ended October 31, 2016 |
| | | | | | | | | | | | |
| | | STONE RIDGE
U.S. LARGE CAP
VARIANCE
RISK PREMIUM
FUND | | | STONE RIDGE
U.S. SMALL CAP
VARIANCE
RISK PREMIUM
FUND | | | STONE RIDGE
U.S. VARIANCE
RISK PREMIUM
MASTER
FUND | |
| INVESTMENT INCOME: | | | | | | | | | | | | |
| Dividend income | | | | | | | | | | | | |
Unaffiliated issuers | | $ | 357,318 | | | $ | 14,921 | | | $ | — | |
Interest income | | | 929,084 | | | | 340,790 | | | | 367 | |
| Total investment income | | | 1,286,402 | | | | 355,711 | | | | 367 | |
| EXPENSES | | | | | | | | | | | | |
Advisory fees (See Note 4) | | | 4,717,970 | | | | 1,649,486 | | | | — | |
Fund accounting and administration fees | | | 212,897 | | | | 64,417 | | | | 2,404 | |
Custody fees | | | 157,748 | | | | 69,203 | | | | 817 | |
Distribution (12b-1) fees — Class M Only | | | 122,083 | | | | 22,694 | | | | 62,834 | |
Legal fees | | | 90,839 | | | | 28,260 | | | | 50,678 | |
Audit and tax related fees | | | 70,814 | | | | 70,814 | | | | 44,816 | |
Transfer agency fees and expenses | | | 64,873 | | | | 37,648 | | | | 59,479 | |
Chief Compliance Officer compensation | | | 56,389 | | | | 56,389 | | | | 14,074 | |
Federal and state registration fees | | | 36,934 | | | | 36,985 | | | | 41,331 | |
Trustees fees and expenses | | | 24,332 | | | | 8,588 | | | | — | |
Other expenses | | | 71,665 | | | | 23,478 | | | | 16,267 | |
| Total expenses before Adviser waiver | | | 5,626,544 | | | | 2,067,962 | | | | 292,700 | |
Expenses recouped by Adviser (See Note 4) | | | — | | | | 12,511 | | | | — | |
| Total net expenses | | | 5,626,544 | | | | 2,080,473 | | | | 292,700 | |
| Net investment loss | | | (4,340,142 | ) | | | (1,724,762 | ) | | | (292,333 | ) |
| NET REALIZED AND UNREALIZED GAIN: | | | | | | | | | | | | |
| Net realized gain (loss) on: | | | | | | | | | | | | |
Investments | | | | | | | | | | | | |
Affiliated issuers (See Note 10) | | | — | | | | — | | | | (744,082 | ) |
Unaffiliated issuers | | | 6,454,374 | | | | 294,475 | | | | — | |
Capital gain distributions from affiliated mutual funds | | | — | | | | — | | | | 9,729,771 | |
Futures contracts | | | (971,480 | ) | | | 621,427 | | | | — | |
Options written | | | 17,292,983 | | | | 1,743,245 | | | | — | |
| Net change in unrealized appreciation (depreciation) on: | | | | | | | | | | | | |
Investments | | | (8,426,075 | ) | | | (511,777 | ) | | | (3,715,638 | ) |
Options written | | | 782,244 | | | | 540,851 | | | | — | |
| Net realized and unrealized gain | | | 15,132,046 | | | | 2,688,221 | | | | 5,270,051 | |
| Net increase in net assets resulting from operations | | $ | 10,791,904 | | | $ | 963,459 | | | $ | 4,977,718 | |
| | | | | | | | | | | | | |
| | | | |
| | The accompanying notes are an integral part of these financial statements. | | (Continued) |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
49
| | |
| Statement of Operations | | For the Year Ended October 31, 2016 |
| | | | | | | | | | | | | | | | |
| | | STONE RIDGE
INTERNATIONAL
DEVELOPED MARKETS
VARIANCE RISK
PREMIUM FUND | | | STONE RIDGE
EMERGING
MARKETS VARIANCE
RISK PREMIUM
FUND | | | STONE RIDGE
INTERNATIONAL
VARIANCE RISK
PREMIUM MASTER
FUND | | | STONE RIDGE
GLOBAL EQUITY
VARIANCE RISK
PREMIUM MASTER
FUND | |
| INVESTMENT INCOME: | | | | | | | | | | | | | | | | |
| Dividend income | | | | | | | | | | | | | | | | |
Unaffiliated issuers | | $ | 22,854 | | | $ | 3,418 | | | $ | — | | | $ | — | |
Interest income | | | 226,795 | | | | 124,755 | | | | 420 | | | | 399 | |
Exchange rebates | | | — | | | | 187,037 | | | | — | | | | — | |
| Total investment income | | | 249,649 | | | | 315,210 | | | | 420 | | | | 399 | |
| EXPENSES | | | | | | | | | | | | | | | | |
Advisory fees (See Note 4) | | | 1,286,439 | | | | 613,573 | | | | — | | | | — | |
Broker and investment interest expenses | | | 253,322 | | | | 11 | | | | — | | | | — | |
Audit and tax related fees | | | 74,569 | | | | 74,569 | | | | 45,572 | | | | 45,562 | |
Chief Compliance Officer compensation | | | 56,389 | | | | 56,389 | | | | 14,074 | | | | 14,074 | |
Fund accounting and administration fees | | | 51,211 | | | | 27,984 | | | | 1,756 | | | | 2,145 | |
Federal and state registration fees | | | 35,907 | | | | 33,272 | | | | 29,450 | | | | 31,149 | |
Transfer agency fees and expenses | | | 31,520 | | | | 29,753 | | | | 33,301 | | | | 45,015 | |
Distribution (12b-1) fees — Class M Only | | | 31,026 | | | | 4,690 | | | | 17,091 | | | | 12,827 | |
Custody fees | | | 24,339 | | | | 28,345 | | | | 50 | | | | 89 | |
Legal fees | | | 20,687 | | | | 981 | | | | 1,424 | | | | 8,534 | |
Trustees fees and expenses | | | 6,128 | | | | 3,050 | | | | — | | | | — | |
Offering costs | | | — | | | | — | | | | — | | | | 3,668 | |
Other expenses | | | 22,623 | | | | 9,825 | | | | 2,917 | | | | 6,387 | |
| Total expenses before Adviser waiver | | | 1,894,160 | | | | 882,442 | | | | 145,635 | | | | 169,450 | |
Expenses waived by Adviser (See Note 4) | | | — | | | | (15,364 | ) | | | (71,499 | ) | | | (54,253 | ) |
| Net expenses before Adviser recoupment | | | 1,894,160 | | | | 867,078 | | | | 74,136 | | | | 115,197 | |
Expenses recouped by Adviser (See Note 4) | | | 95,204 | | | | 21,169 | | | | — | | | | — | |
| Total net expenses | | | 1,989,364 | | | | 888,247 | | | | 74,136 | | | | 115,197 | |
| Net investment loss | | | (1,739,715 | ) | | | (573,037 | ) | | | (73,716 | ) | | | (114,798 | ) |
| NET REALIZED AND UNREALIZED GAIN (LOSS): | | | | | | | | | | | | | | | | |
| Net realized gain (loss) on: | | | | | | | | | | | | | | | | |
Investments | | | | | | | | | | | | | | | | |
Affiliated issuers (See Note 10) | | | — | | | | — | | | | (2,127,816 | ) | | | (1,045,944 | ) |
Unaffiliated issuers | | | (160,725 | ) | | | (107,090 | ) | | | — | | | | — | |
Capital gain distributions from affiliated mutual funds | | | — | | | | — | | | | 313,592 | | | | 1,437,957 | |
Foreign currency translation | | | (64,447 | ) | | | — | | | | — | | | | — | |
Futures contracts | | | 600,202 | | | | 219,569 | | | | — | | | | — | |
Options written | | | 263,232 | | | | 1,581,651 | | | | — | | | | — | |
| Net change in unrealized appreciation (depreciation) on: | | | | | | | | | | | | | | | | |
Investments | | | 86,314 | | | | 40,941 | | | | 1,095,012 | | | | (77,172 | ) |
Foreign currency translation | | | (7,911 | ) | | | — | | | | — | | | | — | |
Options written. | | | (282,028 | ) | | | 76,330 | | | | — | | | | — | |
| Net realized and unrealized gain (loss) | | | 434,637 | | | | 1,811,401 | | | | (719,212 | ) | | | 314,841 | |
| Net increase (decrease) in net assets resulting from operations | | $ | (1,305,078 | ) | | $ | 1,238,364 | | | $ | (792,928 | ) | | $ | 200,043 | |
| | | | | | | | | | | | | | | | | |
| | | | |
| | The accompanying notes are an integral part of these financial statements. | | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
50
| | |
| Statement of Changes in Net Assets | | |
| | | | | | | | | | | | | | | | |
| | | STONE RIDGE REINSURANCE
RISK PREMIUM FUND | | | STONE RIDGE HIGH YIELD
REINSURANCE RISK PREMIUM FUND | |
| | | Year Ended
October 31, 2016 | | | Year Ended
October 31, 2015 | | | Year Ended
October 31, 2016 | | | Year Ended
October 31, 2015 | |
| OPERATIONS: | | | | | | | | | | | | | | | | |
Net investment income | | $ | 57,868,142 | | | $ | 52,327,596 | | | $ | 28,508,767 | | | $ | 25,017,009 | |
| Net realized gain (loss) on: | | | | | | | | | | | | | | | | |
Investments | | | (47,007 | ) | | | 272,487 | | | | (148,756 | ) | | | 261,927 | |
Foreign currency translation | | | (56,001 | ) | | | (1,430,984 | ) | | | 608 | | | | (252,426 | ) |
Futures contracts | | | (651,570 | ) | | | (776,382 | ) | | | (194,917 | ) | | | (261,139 | ) |
Net increase from payments by affiliates | | | — | | | | — | | | | 916 | | | | — | |
| Net change in unrealized appreciation (depreciation) on: | | | | | | | | | | | | | | | | |
Investments | | | 10,742,202 | | | | (9,414,399 | ) | | | 4,224,946 | | | | (1,707,711 | ) |
Foreign currency translation | | | 481,096 | | | | (386,481 | ) | | | 1,616 | | | | 113,408 | |
Futures contracts | | | 330,494 | | | | (23,596 | ) | | | 50,804 | | | | (11,636 | ) |
Net increase in net assets resulting from operations | | | 68,667,356 | | | | 40,568,241 | | | | 32,443,984 | | | | 23,159,432 | |
| | | | |
| DISTRIBUTIONS TO SHAREHOLDERS: | | | | | | | | | | | | | | | | |
From net investment income — Class I | | | (44,832,200 | ) | | | (43,173,165 | ) | | | (23,323,990 | ) | | | (23,349,688 | ) |
From net investment income — Class M | | | (10,993,391 | ) | | | (16,543,977 | ) | | | (3,201,477 | ) | | | (5,697,882 | ) |
Total distributions | | | (55,825,591 | ) | | | (59,717,142 | ) | | | (26,525,467 | ) | | | (29,047,570 | ) |
| | | | |
| CAPITAL SHARE TRANSACTIONS: | | | | | | | | | | | | | | | | |
Proceeds from shares sold — Class I | | | 270,252,491 | | | | 382,402,376 | | | | 77,810,435 | | | | 212,475,030 | |
Proceeds from shares sold — Class M | | | 50,870,858 | | | | 109,107,258 | | | | 20,983,385 | | | | 19,658,217 | |
Proceeds from shares issued to holders in reinvestment of dividends — Class I | | | 36,353,099 | | | | 35,667,351 | | | | 21,153,305 | | | | 21,095,584 | |
Proceeds from shares issued to holders in reinvestment of dividends — Class M | | | 9,285,603 | | | | 14,810,720 | | | | 2,725,406 | | | | 5,129,879 | |
Cost of shares redeemed — Class I | | | (267,915,658 | ) | | | (150,168,432 | ) | | | (106,165,918 | ) | | | (53,386,719 | ) |
Cost of shares redeemed — Class M | | | (76,344,258 | ) | | | (137,386,976 | ) | | | (20,106,465 | ) | | | (35,931,782 | ) |
Net increase (decrease) in net assets from capital share transactions | | | 22,502,135 | | | | 254,432,297 | | | | (3,599,852 | ) | | | 169,040,209 | |
| Total increase in net assets | | | 35,343,900 | | | | 235,283,396 | | | | 2,318,665 | | | | 163,152,071 | |
| | | | |
| NET ASSETS: | | | | | | | | | | | | | | | | |
Beginning of year | | | 1,024,542,414 | | | | 789,259,018 | | | | 495,661,718 | | | | 332,509,647 | |
| End of year | | $ | 1,059,886,314 | | | $ | 1,024,542,414 | | | $ | 497,980,383 | | | $ | 495,661,718 | |
| | | | | | | | | | | | | | | | | |
Accumulated net investment income | | $ | 19,712,883 | | | $ | 8,577,784 | | | $ | 6,867,145 | | | $ | 1,977,051 | |
| | | | |
| | The accompanying notes are an integral part of these financial statements. | | (Continued) |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
51
| | |
| Statement of Changes in Net Assets | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | STONE RIDGE U.S. LARGE CAP
VARIANCE RISK PREMIUM FUND | | | STONE RIDGE U.S. SMALL CAP
VARIANCE RISK PREMIUM FUND | | | STONE RIDGE U.S. VARIANCE RISK
PREMIUM MASTER FUND | |
| | | YEAR ENDED
OCTOBER 31, 2016 | | | YEAR ENDED
OCTOBER 31, 2015 | | | YEAR ENDED
OCTOBER 31, 2016 | | | YEAR ENDED
OCTOBER 31, 2015 | | | YEAR ENDED
OCTOBER 31, 2016 | | | YEAR ENDED
OCTOBER 31, 2015 | |
| OPERATIONS: | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) | | $ | (4,340,142 | ) | | $ | (4,943,773 | ) | | $ | (1,724,762 | ) | | $ | (1,931,723 | ) | | $ | (292,333 | ) | | $ | 1,976,839 | |
| Net realized gain (loss) on: | | | | | | | | | | | | | | | | | | | | | | | | |
Investments | | | | | | | | | | | | | | | | | | | | | | | | |
Affiliated issuers | | | — | | | | — | | | | — | | | | — | | | | (744,082 | ) | | | 508,702 | |
Unaffiliated issuers | | | 6,454,374 | | | | 6,537,709 | | | | 294,475 | | | | 139,673 | | | | — | | | | — | |
Capital gain distributions from affiliated mutual funds | | | — | | | | — | | | | — | | | | — | | | | 9,729,771 | | | | 2,060,696 | |
Futures contracts | | | (971,480 | ) | | | (297,392 | ) | | | 621,427 | | | | 823,500 | | | | — | | | | — | |
Options written | | | 17,292,983 | | | | 26,051,616 | | | | 1,743,245 | | | | 7,901,098 | | | | — | | | | — | |
| Net change in unrealized appreciation (depreciation) on: | | | | | | | | | | | | | | | | | | | | | | | | |
Investments | | | (8,426,075 | ) | | | (3,680,835 | ) | | | (511,777 | ) | | | (118,568 | ) | | | (3,715,638 | ) | | | 6,994,086 | |
Options written | | | 782,244 | | | | (769,690 | ) | | | 540,851 | | | | (346,721 | ) | | | — | | | | — | |
Net increase in net assets resulting from operations | | | 10,791,904 | | | | 22,897,635 | | | | 963,459 | | | | 6,467,259 | | | | 4,977,718 | | | | 11,540,323 | |
| | | | | | |
| DISTRIBUTIONS TO SHAREHOLDERS: | | | | | | | | | | | | | | | | | | | | | | | | |
From net investment income — Class I | | | — | | | | — | | | | — | | | | — | | | | — | | | | (1,377,018 | ) |
From net investment income — Class M | | | — | | | | — | | | | — | | | | — | | | | — | | | | (885,252 | ) |
From net realized gain — Class I | | | (15,614,510 | ) | | | (7,144,616 | ) | | | (4,348,340 | ) | | | (1,157,147 | ) | | | (2,007,627 | ) | | | (2,887,634 | ) |
From net realized gain — Class M | | | (4,927,839 | ) | | | (2,794,610 | ) | | | (660,816 | ) | | | (137,010 | ) | | | (568,167 | ) | | | (2,667,930 | ) |
Total distributions | | | (20,542,349 | ) | | | (9,939,226 | ) | | | (5,009,156 | ) | | | (1,294,157 | ) | | | (2,575,794 | ) | | | (7,817,834 | ) |
| | | | | | |
| CAPITAL SHARE TRANSACTIONS: | | | | | | | | | | | | | | | | | | | | | | | | |
Proceeds from shares sold — Class I | | | 81,097,278 | | | | 90,216,108 | | | | 31,870,861 | | | | 48,902,979 | | | | 51,898,948 | | | | 70,532,694 | |
Proceeds from shares sold — Class M | | | 9,996,933 | | | | 12,151,747 | | | | 1,726,539 | | | | 5,829,236 | | | | 8,400,547 | | | | 12,643,865 | |
Proceeds from shares issued to holders in reinvestment of dividends — Class I | | | 6,026,413 | | | | 2,374,142 | | | | 1,486,034 | | | | 323,769 | | | | 929,028 | | | | 2,008,274 | |
Proceeds from shares issued to holders in reinvestment of dividends — Class M | | | 4,579,685 | | | | 2,668,919 | | | | 590,198 | | | | 128,099 | | | | 535,172 | | | | 2,421,687 | |
Cost of shares redeemed — Class I | | | (54,493,249 | ) | | | (122,729,821 | ) | | | (28,363,904 | ) | | | (56,295,078 | ) | | | (19,652,871 | ) | | | (94,309,886 | ) |
Cost of shares redeemed — Class M | | | (36,981,475 | ) | | | (37,738,874 | ) | | | (5,269,841 | ) | | | (3,411,519 | ) | | | (29,540,300 | ) | | | (71,115,462 | ) |
Net increase (decrease) in net assets from capital share transactions | | | 10,225,585 | | | | (53,057,779 | ) | | | 2,039,887 | | | | (4,522,514 | ) | | | 12,570,524 | | | | (77,818,828 | ) |
| Total increase (decrease) in net assets | | | 475,140 | | | | (40,099,370 | ) | | | (2,005,810 | ) | | | 650,588 | | | | 14,972,448 | | | | (74,096,339 | ) |
| | | | | | |
| NET ASSETS: | | | | | | | | | | | | | | | | | | | | | | | | |
Beginning of year | | | 378,750,069 | | | | 418,849,439 | | | | 130,293,087 | | | | 129,642,499 | | | | 198,593,585 | | | | 272,689,924 | |
| End of year | | $ | 379,225,209 | | | $ | 378,750,069 | | | $ | 128,287,277 | | | $ | 130,293,087 | | | $ | 213,566,033 | | | $ | 198,593,585 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Accumulated net investment income (loss) | | $ | — | | | $ | (2,348,924 | ) | | $ | (1,397,509 | ) | | $ | (1,594,558 | ) | | $ | 663,366 | | | $ | 799,094 | |
| | | | |
| | The accompanying notes are an integral part of these financial statements. | | (Continued) |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
52
| | |
| Statement of Changes in Net Assets | | |
| | | | | | | | | | | | | | | | |
| | | STONE RIDGE INTERNATIONAL DEVELOPED
MARKETS VARIANCE RISK PREMIUM FUND | | | STONE RIDGE EMERGING MARKETS
VARIANCE RISK PREMIUM FUND | |
| | | YEAR ENDED
OCTOBER 31, 2016 | | | YEAR ENDED
OCTOBER 31, 2015 | | | YEAR ENDED
OCTOBER 31, 2016 | | | YEAR ENDED
OCTOBER 31, 2015 | |
| OPERATIONS: | | | | | | | | | | | | | | | | |
Net investment loss | | $ | (1,739,715 | ) | | $ | (2,004,434 | ) | | $ | (573,037 | ) | | $ | (835,563 | ) |
| Net realized gain (loss) on: | | | | | | | | | | | | | | | | |
Investments | | | | | | | | | | | | | | | | |
Unaffiliated issuers | | | (160,725 | ) | | | (5,692 | ) | | | (107,090 | ) | | | 50,317 | |
Foreign currency translation | | | (64,447 | ) | | | (116,275 | ) | | | — | | | | — | |
Futures contracts | | | 600,202 | | | | (1,112,291 | ) | | | 219,569 | | | | (32,685 | ) |
Options written | | | 263,232 | | | | 6,324,254 | | | | 1,581,651 | | | | (4,465,014 | ) |
| Net change in unrealized appreciation (depreciation) on: | | | | | | | | | | | | | | | | |
Investments | | | 86,314 | | | | (88,471 | ) | | | 40,941 | | | | (69,592 | ) |
Foreign currency translation | | | (7,911 | ) | | | 39,991 | | | | — | | | | — | |
Options written | | | (282,028 | ) | | | 54,766 | | | | 76,330 | | | | (107,558 | ) |
Net increase (decrease) in net assets resulting from operations | | | (1,305,078 | ) | | | 3,091,848 | | | | 1,238,364 | | | | (5,460,095 | ) |
| | | | |
| DISTRIBUTIONS TO SHAREHOLDERS: | | | | | | | | | | | | | | | | |
From net realized gain — Class I | | | (1,462,737 | ) | | | (673,304 | ) | | | — | | | | — | |
From net realized gain — Class M | | | (340,903 | ) | | | (185,511 | ) | | | — | | | | — | |
Return of Capital — Class I | | | — | | | | — | | | | — | | | | (414,733 | ) |
Return of Capital — Class M | | | — | | | | — | | | | — | | | | (39,436 | ) |
Total distributions | | | (1,803,640 | ) | | | (858,815 | ) | | | — | | | | (454,169 | ) |
| | | | |
| CAPITAL SHARE TRANSACTIONS: | | | | | | | | | | | | | | | | |
Proceeds from shares sold — Class I | | | 16,481,026 | | | | 52,895,209 | | | | 8,273,369 | | | | 27,262,668 | |
Proceeds from shares sold — Class M | | | 4,146,014 | | | | 3,258,887 | | | | 506,326 | | | | 1,860,730 | |
Proceeds from shares issued to holders in reinvestment of dividends — Class I | | | 1,200,937 | | | | 558,904 | | | | — | | | | 355,515 | |
Proceeds from shares issued to holders in reinvestment of dividends — Class M | | | 330,808 | | | | 179,324 | | | | — | | | | 31,514 | |
Cost of shares redeemed — Class I | | | (28,362,623 | ) | | | (24,360,434 | ) | | | (11,595,332 | ) | | | (10,942,375 | ) |
Cost of shares redeemed — Class M | | | (5,404,734 | ) | | | (1,579,652 | ) | | | (134,847 | ) | | | (2,081,457 | ) |
Net increase (decrease) in net assets from capital share transactions | | | (11,608,572 | ) | | | 30,952,238 | | | | (2,950,484 | ) | | | 16,486,595 | |
| Total increase (decrease) in net assets | | | (14,717,290 | ) | | | 33,185,271 | | | | (1,712,120 | ) | | | 10,572,331 | |
| | | | |
| NET ASSETS: | | | | | | | | | | | | | | | | |
Beginning of year | | | 111,531,018 | | | | 78,345,747 | | | | 50,416,511 | | | | 39,844,180 | |
| End of year | | $ | 96,813,728 | | | $ | 111,531,018 | | | $ | 48,704,391 | | | $ | 50,416,511 | |
| | | | | | | | | | | | | | | | | |
Accumulated net investment loss | | $ | (1,378,511 | ) | | $ | (664,737 | ) | | $ | (478,377 | ) | | $ | (698,117 | ) |
| | | | |
| | The accompanying notes are an integral part of these financial statements. | | (Continued) |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
53
| | |
| Statement of Changes in Net Assets | | |
| | | | | | | | | | | | | | | | |
| | | STONE RIDGE INTERNATIONAL VARIANCE
RISK PREMIUM MASTER FUND | | | STONE RIDGE GLOBAL EQUITY VARIANCE
RISK PREMIUM MASTER FUND | |
| | | YEAR ENDED
OCTOBER 31, 2016 | | | YEAR ENDED
OCTOBER 31, 2015 | | | YEAR ENDED
OCTOBER 31, 2016 | | | PERIOD ENDED
OCTOBER 31, 2015(1) | |
| OPERATIONS: | | | | | | | | | | | | | | | | |
Net investment gain (loss) | | $ | (73,716 | ) | | $ | 157,309 | | | $ | (114,798 | ) | | $ | 193,720 | |
| Net realized gain (loss) on: | | | | | | | | | | | | | | | | |
Investments | | | | | | | | | | | | | | | | |
Affiliated issuers | | | (2,127,816 | ) | | | (170,292 | ) | | | (1,045,944 | ) | | | 367,925 | |
Capital gain distributions from affiliated mutual funds | | | 313,592 | | | | — | | | | 1,437,957 | | | | 331,313 | |
Net change in unrealized appreciation (depreciation) on: | | | | | | | | | | | | | | | | |
Investments | | | 1,095,012 | | | | (422,795 | ) | | | (77,172 | ) | | | 336,098 | |
Net increase (decrease) in net assets resulting from operations | | | (792,928 | ) | | | (435,778 | ) | | | 200,043 | | | | 1,229,056 | |
| | | | |
| DISTRIBUTIONS TO SHAREHOLDERS: | | | | | | | | | | | | | | | | |
From net investment income — Class I | | | — | | | | (33,564 | ) | | | — | | | | (296,465 | ) |
From net investment income — Class M | | | — | | | | (99,039 | ) | | | — | | | | (19,134 | ) |
From net realized gain — Class I | | | — | | | | — | | | | (561,171 | ) | | | — | |
From net realized gain — Class M | | | — | | | | — | | | | (138,208 | ) | | | — | |
Return of capital — Class I | | | — | | | | (26,597 | ) | | | — | | | | — | |
Return of capital — Class M | | | — | | | | (78,378 | ) | | | — | | | | — | |
Total distributions | | | — | | | | (237,578 | ) | | | (699,379 | ) | | | (315,599 | ) |
| | | | |
| CAPITAL SHARE TRANSACTIONS: | | | | | | | | | | | | | | | | |
Proceeds from shares sold — Class I | | | 6,940,582 | | | | 6,065,395 | | | | 7,190,034 | | | | 72,770,132 | |
Proceeds from shares sold — Class M | | | 318,715 | | | | 3,143,158 | | | | 1,494,980 | | | | 10,750,950 | |
Proceeds from shares issued to holders in reinvestment of dividends — Class I | | | — | | | | 55,948 | | | | 542,148 | | | | 290,653 | |
Proceeds from shares issued to holders in reinvestment of dividends — Class M | | | — | | | | 141,815 | | | | 128,956 | | | | 15,370 | |
Cost of shares redeemed — Class I (2) | | | (8,523,579 | ) | | | (2,407,219 | ) | | | (12,839,782 | ) | | | (35,019,649 | ) |
Cost of shares redeemed — Class M | | | (15,585,784 | ) | | | (2,400,366 | ) | | | (3,615,053 | ) | | | (1,357,949 | ) |
Net increase (decrease) in net assets from capital share transactions | | | (16,850,066 | ) | | | 4,598,731 | | | | (7,098,717 | ) | | | 47,449,507 | |
| Total increase (decrease) in net assets | | | (17,642,994 | ) | | | 3,925,375 | | | | (7,598,053 | ) | | | 48,362,964 | |
| | | | |
| NET ASSETS: | | | | | | | | | | | | | | | | |
Beginning of year | | | 29,430,134 | | | | 25,504,759 | | | | 48,362,964 | | | | — | |
| End of year | | $ | 11,787,140 | | | $ | 29,430,134 | | | $ | 40,764,911 | | | $ | 48,362,964 | |
| | | | | | | | | | | | | | | | | |
Accumulated net investment income (loss) | | $ | (18,741 | ) | | $ | 288,703 | | | $ | (86,052 | ) | | $ | 27,379 | |
| | (1) | | Commenced operations on November 14, 2014. |
| | (2) | | Net of redemption fees of $0,$0,$0 and $11,206, respectively. |
| | | | |
| | The accompanying notes are an integral part of these financial statements. | | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
54
| | |
| Statement of Cash Flows | | For the Year Ended October 31, 2016 |
| | | | | | | | |
| | | STONE RIDGE REINSURANCE
RISK PREMIUM FUND | | | STONE RIDGE HIGH YIELD
REINSURANCE RISK
PREMIUM FUND | |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | |
Net increase in net assets resulting from operations | | $ | 68,667,356 | | | $ | 32,443,984 | |
| Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used in) operating activities: | | | | | | | | |
Net realized and unrealized gain: | | | (10,955,203 | ) | | | (4,078,363 | ) |
Amortization and accretion of premium and discount | | | (370,737 | ) | | | (144,573 | ) |
| Changes in assets and liabilities: | | | | | | | | |
Foreign currency | | | (559,706 | ) | | | (30,668 | ) |
Variation margin on futures contracts | | | — | | | | (18,594 | ) |
Receivable from affiliates | | | — | | | | (916 | ) |
Receivable for investments sold | | | (4,874,929 | ) | | | (3,281,468 | ) |
Collateral held at broker | | | 1,493,759 | | | | 116,012 | |
Dividends receivable | | | 321,522 | | | | 211,906 | |
Interest receivable | | | (251,574 | ) | | | 1,413 | |
Interest payable | | | 39,303 | | | | 10,879 | |
Other assets | | | 11,727 | | | | 12,387 | |
Payable to Adviser | | | 70,742 | | | | (2,549 | ) |
Payable to Trustees | | | 6,831 | | | | 820 | |
Payable to Custodian | | | (1,318,976 | ) | | | 799 | |
Accrued distribution fees | | | 6,190 | | | | 3,210 | |
Payable for Chief Compliance Officer compensation | | | (3,611 | ) | | | (3,611 | ) |
Other accrued expenses | | | 39,550 | | | | 34,050 | |
Purchases of investments | | | (308,224,729 | ) | | | (101,499,971 | ) |
Proceeds from sale of investments | | | 253,254,783 | | | | 100,146,766 | |
Net purchases and sales of short-term investments | | | (105,508 | ) | | | 405,054 | |
Net cash provided by (used in) operating activities | | | (2,753,210 | ) | | | 24,326,567 | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | |
Proceeds from shares issued | | | 321,141,905 | | | | 99,149,027 | |
Payment on shares redeemed | | | (344,201,806 | ) | | | (126,328,838 | ) |
Cash distributions to shareholders | | | (10,186,889 | ) | | | (2,646,756 | ) |
Loan withdrawals(1) | | | 36,000,000 | | | | 10,500,000 | |
Loan paydowns | | | — | | | | (5,000,000 | ) |
Net cash used in (provided by) financing activities | | | 2,753,210 | | | | (24,326,567 | ) |
Net increase in cash | | | — | | | | — | |
Cash, beginning of year | | | — | | | | — | |
Cash, end of year | | $ | — | | | $ | — | |
| | | | | | | | | |
| NON-CASH FINANCING ACTIVITIES: | | | | | | | | |
Reinvested distributions | | $ | 45,638,702 | | | $ | 23,878,711 | |
| | (1) | | During the year ended October 31, 2016, the Reinsurance Fund and the High Yield Fund paid interest expenses of $39,303 and $28,264, respectively, in connection with their financing facilities. |
| | | | |
| | The accompanying notes are an integral part of these financial statements. | | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
55
| | |
| Financial Highlights | | October 31, 2016 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | PER SHARE DATA: | |
| | | Income (loss) from Investment Operations | | | Distributions to Shareholders | |
| | | Net Asset
Value,
Beginning
of Period | | | Net
Investment
Income(2) | | | Net Realized
and Unrealized
Gains (Losses) | | | Total from
Investment
Operations | | | Net
Investment
Income | | | Net
Realized
Gains | | | Total
Distributions | |
| STONE RIDGE REINSURANCE RISK PREMIUM FUND—CLASS I | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended October 31, 2016 | | $ | 10.33 | | | | 0.53 | | | | 0.11 | | | | 0.64 | | | | (0.55 | ) | | | — | | | | (0.55 | ) |
| Year Ended October 31, 2015 | | $ | 10.69 | | | | 0.55 | | | | (0.13 | ) | | | 0.42 | | | | (0.78 | ) | | | — | | | | (0.78 | ) |
| Year Ended October 31, 2014 | | $ | 10.36 | | | | 0.53 | | | | 0.31 | | | | 0.84 | | | | (0.51 | ) | | | — | | | | (0.51 | ) |
Period Ended October 31, 2013(1) | | $ | 10.00 | | | | 0.13 | | | | 0.32 | | | | 0.45 | | | | (0.09 | ) | | | — | | | | (0.09 | ) |
| STONE RIDGE REINSURANCE RISK PREMIUM FUND—CLASS M | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended October 31, 2016 | | $ | 10.33 | | | | 0.52 | | | | 0.11 | | | | 0.63 | | | | (0.54 | ) | | | — | | | | (0.54 | ) |
| Year Ended October 31, 2015 | | $ | 10.69 | | | | 0.52 | | | | (0.11 | ) | | | 0.41 | | | | (0.77 | ) | | | — | | | | (0.77 | ) |
| Year Ended October 31, 2014 | | $ | 10.37 | | | | 0.51 | | | | 0.31 | | | | 0.82 | | | | (0.50 | ) | | | — | | | | (0.50 | ) |
Period Ended October 31, 2013(1) | | $ | 10.00 | | | | 0.12 | | | | 0.33 | | | | 0.45 | | | | (0.08 | ) | | | — | | | | (0.08 | ) |
| STONE RIDGE HIGH YIELD REINSURANCE RISK PREMIUM FUND—CLASS I | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended October 31, 2016 | | $ | 10.38 | | | | 0.58 | | | | 0.09 | | | | 0.67 | | | | (0.55 | ) | | | — | | | | (0.55 | ) |
| Year Ended October 31, 2015 | | $ | 10.75 | | | | 0.59 | | | | (0.08 | ) | | | 0.51 | | | | (0.88 | ) | | | — | | | | (0.88 | ) |
| Year Ended October 31, 2014 | | $ | 10.41 | | | | 0.58 | | | | 0.37 | | | | 0.95 | | | | (0.61 | ) | | | — | | | | (0.61 | ) |
Period Ended October 31, 2013(1) | | $ | 10.00 | | | | 0.20 | | | | 0.35 | | | | 0.55 | | | | (0.14 | ) | | | — | | | | (0.14 | ) |
| STONE RIDGE HIGH YIELD REINSURANCE RISK PREMIUM FUND—CLASS M | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended October 31, 2016 | | $ | 10.38 | | | | 0.57 | | | | 0.08 | | | | 0.65 | | | | (0.54 | ) | | | — | | | | (0.54 | ) |
| Year Ended October 31, 2015 | | $ | 10.75 | | | | 0.55 | | | | (0.06 | ) | | | 0.49 | | | | (0.86 | ) | | | — | | | | (0.86 | ) |
| Year Ended October 31, 2014 | | $ | 10.41 | | | | 0.56 | | | | 0.37 | | | | 0.93 | | | | (0.59 | ) | | | — | | | | (0.59 | ) |
Period Ended October 31, 2013(1) | | $ | 10.00 | | | | 0.18 | | | | 0.36 | | | | 0.54 | | | | (0.13 | ) | | | — | | | | (0.13 | ) |
| | (1) | | The Fund commenced operations on February 1, 2013. |
| | (2) | | Net investment income per share has been calculated based on average shares outstanding during the period. |
| | (5) | | Total return represents the rate that an investor would have earned (or lost) on an investment in the Fund (assuming the reinvestment of all dividends and distributions). |
| | (6) | | Includes borrowing and investment-related expenses not covered by the Funds’ expense limitation agreement. See Note 4. |
| | | | |
| | The accompanying footnotes are an integral part of these financial statements. | | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
56
| | |
| Financial Highlights | | October 31, 2016 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | SUPPLEMENT DATA AND RATIOS: | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Asset
Value,
End of Period | | | Total
Return(5) | | | | | | Net Assets, End of Period (000’s) | | | Ratio of Expenses
to Average Net Assets
(Before Expense
Reimbursement/Recoupment) | | | Ratio of Expenses
to Average Net Assets
(After Expense
Reimbursement/Recoupment) | | | Ratio of Net Investment Income
to Average Net Assets
(Before Expense
Reimbursement/Recoupment) | | | Ratio of Net Investment Income
to Average Net Assets
(After Expense
Reimbursement/Recoupment) | | | Portfolio
Turnover Rate | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 10.42 | | | | 6.46 | % | | | | | | $ | 863,972 | | | | 1.64 | %(6) | | | N/A | | | | 5.23 | %(6) | | | N/A | | | | 23.97 | % | | | | |
| $ | 10.33 | | | | 4.22 | % | | | | | | $ | 813,989 | | | | 1.65 | % | | | N/A | | | | 5.46 | % | | | N/A | | | | 14.79 | % | | | | |
| $ | 10.69 | | | | 8.39 | % | | | | | | $ | 557,255 | | | | 1.71 | % | | | 1.72 | % | | | 5.07 | % | | | 5.06 | % | | | 16.13 | % | | | | |
| $ | 10.36 | | | | 4.53 | %(3) | | | | | | $ | 360,434 | | | | 1.86 | %(4) | | | 1.87 | %(4) | | | 1.76 | %(4) | | | 1.75 | %(4) | | | 11.38 | %(3) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 10.42 | | | | 6.34 | % | | | | | | $ | 195,914 | | | | 1.79 | %(6) | | | N/A | | | | 5.08 | %(6) | | | N/A | | | | 23.97 | % | | | | |
| $ | 10.33 | | | | 4.06 | % | | | | | | $ | 210,554 | | | | 1.80 | % | | | N/A | | | | 5.13 | % | | | N/A | | | | 14.79 | % | | | | |
| $ | 10.69 | | | | 8.18 | % | | | | | | $ | 232,004 | | | | 1.85 | % | | | 1.86 | % | | | 4.95 | % | | | 4.94 | % | | | 16.13 | % | | | | |
| $ | 10.37 | | | | 4.48 | %(3) | | | | | | $ | 150,416 | | | | 2.01 | %(4) | | | 2.02 | %(4) | | | 1.56 | %(4) | | | 1.55 | %(4) | | | 11.38 | %(3) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 10.50 | | | | 6.82 | % | | | | | | $ | 434,269 | | | | 1.68 | %(6) | | | N/A | | | | 5.70 | %(6) | | | N/A | | | | 20.32 | % | | | | |
| $ | 10.38 | | | | 5.06 | % | | | | | | $ | 436,523 | | | | 1.69 | % | | | N/A | | | | 5.76 | % | | | N/A | | | | 11.64 | % | | | | |
| $ | 10.75 | | | | 9.44 | % | | | | | | $ | 259,515 | | | | 1.78 | % | | | 1.80 | % | | | 5.58 | % | | | 5.56 | % | | | 15.79 | % | | | | |
| $ | 10.41 | | | | 5.58 | %(3) | | | | | | $ | 145,995 | | | | 1.95 | %(4) | | | 1.94 | %(4) | | | 2.66 | %(4) | | | 2.67 | %(4) | | | 12.82 | %(3) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 10.49 | | | | 6.60 | % | | | | | | $ | 63,712 | | | | 1.83 | %(6) | | | N/A | | | | 5.60 | %(6) | | | N/A | | | | 20.32 | % | | | | |
| $ | 10.38 | | | | 4.90 | % | | | | | | $ | 59,139 | | | | 1.84 | % | | | N/A | | | | 5.46 | % | | | N/A | | | | 11.64 | % | | | | |
| $ | 10.75 | | | | 9.33 | % | | | | | | $ | 72,995 | | | | 1.93 | % | | | 1.95 | % | | | 5.42 | % | | | 5.40 | % | | | 15.79 | % | | | | |
| $ | 10.41 | | | | 5.43 | %(3) | | | | | | $ | 61,234 | | | | 2.11 | %(4) | | | 2.10 | %(4) | | | 2.47 | %(4) | | | 2.48 | %(4) | | | 12.82 | %(3) | | | | |
| | | | |
| | The accompanying footnotes are an integral part of these financial statements. | | (Continued) |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
57
| | |
| Financial Highlights | | October 31, 2016 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | PER SHARE DATA: | |
| | | Income (loss) from Investment Operations | | | Distributions to Shareholders | |
| | | Net Asset
Value,
Beginning
of Period | | | Net
Investment
Income
(Loss)(3) | | | Net Realized
and
Unrealized Gains | | | Total from
Investment
Operations | | | Net
Investment
Income | | | Net
Realized
Gains | | | Return
of Capital | | | Total
Distributions | |
STONE RIDGE U.S. LARGE CAP VARIANCE RISK
PREMIUM FUND—CLASS I | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended October 31, 2016 | | $ | 10.89 | | | | (0.12 | ) | | | 0.40 | | | | 0.28 | | | | — | | | | (0.59 | ) | | | — | | | | (0.59 | ) |
| Year Ended October 31, 2015 | | $ | 10.50 | | | | (0.14 | ) | | | 0.79 | | | | 0.65 | | | | — | | | | (0.26 | ) | | | — | | | | (0.26 | ) |
| Year Ended October 31, 2014 | | $ | 10.48 | | | | (0.14 | ) | | | 0.94 | | | | 0.80 | | | | — | | | | (0.78 | ) | | | — | | | | (0.78 | ) |
Period Ended
October 31, 2013(1) | | $ | 10.00 | | | | (0.07 | ) | | | 0.80 | | | | 0.73 | | | | — | | | | (0.25 | ) | | | — | | | | (0.25 | ) |
STONE RIDGE U.S. LARGE CAP VARIANCE RISK
PREMIUM FUND—CLASS M | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended October 31, 2016 | | $ | 10.84 | | | | (0.13 | ) | | | 0.40 | | | | 0.27 | | | | — | | | | (0.59 | ) | | | — | | | | (0.59 | ) |
| Year Ended October 31, 2015 | | $ | 10.47 | | | | (0.15 | ) | | | 0.78 | | | | 0.63 | | | | — | | | | (0.26 | ) | | | — | | | | (0.26 | ) |
| Year Ended October 31, 2014 | | $ | 10.47 | | | | (0.15 | ) | | | 0.93 | | | | 0.78 | | | | — | | | | (0.78 | ) | | | — | | | | (0.78 | ) |
Period Ended
October 31, 2013(1) | | $ | 10.00 | | | | (0.07 | ) | | | 0.79 | | | | 0.72 | | | | — | | | | (0.25 | ) | | | — | | | | (0.25 | ) |
STONE RIDGE U.S. SMALL CAP VARIANCE RISK
PREMIUM FUND—CLASS I | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended October 31, 2016 | | $ | 10.46 | | | | (0.13 | ) | | | 0.16 | | | | 0.03 | | | | — | | | | (0.40 | ) | | | — | | | | (0.40 | ) |
| Year Ended October 31, 2015 | | $ | 10.04 | | | | (0.15 | ) | | | 0.67 | | | | 0.52 | | | | — | | | | (0.10 | ) | | | — | | | | (0.10 | ) |
| Year Ended October 31, 2014 | | $ | 10.65 | | | | (0.16 | ) | | | 0.45 | | | | 0.29 | | | | — | | | | (0.75 | ) | | | (0.15 | ) | | | (0.90 | ) |
Period Ended
October 31, 2013(1) | | $ | 10.00 | | | | (0.09 | ) | | | 0.99 | | | | 0.90 | | | | — | | | | (0.25 | ) | | | — | | | | (0.25 | ) |
STONE RIDGE U.S. SMALL CAP VARIANCE RISK
PREMIUM FUND—CLASS M | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended October 31, 2016 | | $ | 10.42 | | | | (0.14 | ) | | | 0.15 | | | | 0.01 | | | | — | | | | (0.40 | ) | | | — | | | | (0.40 | ) |
| Year Ended October 31, 2015 | | $ | 10.01 | | | | (0.17 | ) | | | 0.68 | | | | 0.51 | | | | — | | | | (0.10 | ) | | | — | | | | (0.10 | ) |
| Year Ended October 31, 2014 | | $ | 10.64 | | | | (0.17 | ) | | | 0.44 | | | | 0.27 | | | | — | | | | (0.75 | ) | | | (0.15 | ) | | | (0.90 | ) |
Period Ended
October 31, 2013(1) | | $ | 10.00 | | | | (0.10 | ) | | | 0.99 | | | | 0.89 | | | | — | | | | (0.25 | ) | | | — | | | | (0.25 | ) |
STONE RIDGE U.S. VARIANCE RISK PREMIUM
MASTER FUND—CLASS I | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended October 31, 2016 | | $ | 10.69 | | | | (0.01 | )(4) | | | 0.20 | (4) | | | 0.19 | (4) | | | — | | | | (0.14 | ) | | | — | | | | (0.14 | ) |
| Year Ended October 31, 2015 | | $ | 10.50 | | | | 0.10 | (4) | | | 0.48 | (4) | | | 0.58 | (4) | | | (0.10 | ) | | | (0.29 | ) | | | — | | | | (0.39 | ) |
| Year Ended October 31, 2014 | | $ | 10.40 | | | | 0.51 | (4) | | | 0.10 | (4) | | | 0.61 | (4) | | | (0.51 | ) | | | — | | | | — | | | | (0.51 | ) |
Period Ended
October 31, 2013(2) | | $ | 10.00 | | | | 0.24 | (4) | | | 0.39 | (4) | | | 0.63 | (4) | | | (0.23 | ) | | | — | | | | — | | | | (0.23 | ) |
STONE RIDGE U.S. VARIANCE RISK
PREMIUM MASTER FUND—CLASS M | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended October 31, 2016 | | $ | 10.67 | | | | (0.03 | )(4) | | | 0.21 | (4) | | | 0.18 | (4) | | | — | | | | (0.14 | ) | | | — | | | | (0.14 | ) |
| Year Ended October 31, 2015 | | $ | 10.50 | | | | 0.10 | (4) | | | 0.46 | (4) | | | 0.56 | (4) | | | (0.10 | ) | | | (0.29 | ) | | | — | | | | (0.39 | ) |
| Year Ended October 31, 2014 | | $ | 10.40 | | | | 0.51 | (4) | | | 0.09 | (4) | | | 0.60 | (4) | | | (0.50 | ) | | | — | | | | — | | | | (0.50 | ) |
Period Ended
October 31, 2013(2) | | $ | 10.00 | | | | 0.24 | (4) | | | 0.39 | (4) | | | 0.63 | (4) | | | (0.23 | ) | | | — | | | | — | | | | (0.23 | ) |
| | (1) | | The Fund commenced operations on May 1, 2013. |
| | (2) | | The Fund commenced operations on May 22, 2013. |
| | (3) | | Net investment income (loss) per share has been calculated based on average shares outstanding during the period. |
| | (4) | | Per share amounts only include income and expenses of the Stone Ridge U.S. Variance Risk Premium Master Fund which are shown on the Fund’s Statement of Operations. Amounts do not include the Fund’s proportionate share of the income and expenses of the underlying investor funds. |
| | (7) | | Total return represents the rate that an investor would have earned (or lost) on an investment in the Fund (assuming the reinvestment of all dividends and distributions). |
| | (8) | | Includes borrowing and investment-related expenses not covered by the Funds’ expense limitation agreement. See Note 4. |
| | | | |
| | The accompanying footnotes are an integral part of these financial statements. | | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
58
| | |
| Financial Highlights | | October 31, 2016 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | SUPPLEMENT DATA AND RATIOS: | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Asset
Value,
End of Period | | | Total
Return(7) | | | Net Assets,
End of Period
(000’s) | | | Ratio of Expenses
to Average Net Assets
(Before Expense
Reimbursement/Recoupment) | | | Ratio of Expenses
to Average Net Assets
(After Expense
Reimbursement/Recoupment) | | | Ratio of Net Investment Income
(Loss) to Average Net Assets
(Before Expense
Reimbursement/Recoupment) | | | Ratio of Net Investment Income
(Loss) to Average Net Assets
(After Expense
Reimbursement/Recoupment) | | | Portfolio
Turnover Rate | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 10.58 | | | | 2.75 | % | | $ | 311,317 | | | | 1.46 | %(8) | | | N/A | | | | (1.12 | %)(8) | | | N/A | | | | 6.12 | % | | | | |
| $ | 10.89 | | | | 6.33 | % | | $ | 285,403 | | | | 1.54 | % | | | N/A | | | | (1.28 | %) | | | N/A | | | | 10.14 | % | | | | |
| $ | 10.50 | | | | 7.95 | % | | $ | 305,504 | | | | 1.62 | % | | | 1.64 | % | | | (1.27 | %) | | | (1.29 | %) | | | 97.63 | % | | | | |
| $ | 10.48 | | | | 7.35 | %(5) | | $ | 264,883 | | | | 1.65 | %(6) | | | 1.59 | %(6) | | | (1.42 | %)(6) | | | (1.36 | %)(6) | | | 56.76 | %(5) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 10.52 | | | | 2.67 | % | | $ | 67,909 | | | | 1.61 | %(8) | | | N/A | | | | (1.27 | %)(8) | | | N/A | | | | 6.12 | % | | | | |
| $ | 10.84 | | | | 6.15 | % | | $ | 93,347 | | | | 1.69 | % | | | N/A | | | | (1.43 | %) | | | N/A | | | | 10.14 | % | | | | |
| $ | 10.47 | | | | 7.76 | % | | $ | 113,345 | | | | 1.77 | % | | | 1.79 | % | | | (1.42 | %) | | | (1.44 | %) | | | 97.63 | % | | | | |
| $ | 10.47 | | | | 7.25 | %(5) | | $ | 97,381 | | | | 1.80 | %(6) | | | 1.74 | %(6) | | | (1.57 | %)(6) | | | (1.51 | %)(6) | | | 56.76 | %(5) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 10.09 | | | | 0.31 | % | | $ | 114,980 | | | | 1.55 | %(8) | | | 1.56 | %(8) | | | (1.28 | %)(8) | | | (1.29 | %)(8) | | | 0.00 | % | | | | |
| $ | 10.46 | | | | 5.23 | % | | $ | 113,269 | | | | 1.56 | % | | | 1.55 | % | | | (1.50 | %) | | | (1.49 | %) | | | 0.00 | % | | | | |
| $ | 10.04 | | | | 2.85 | % | | $ | 115,717 | | | | 1.60 | % | | | 1.62 | % | | | (1.54 | %) | | | (1.56 | %) | | | 34.92 | % | | | | |
| $ | 10.65 | | | | 9.09 | %(5) | | $ | 100,579 | | | | 1.80 | %(6) | | | 1.75 | %(6) | | | (1.76 | %)(6) | | | (1.71 | %)(6) | | | 33.66 | %(5) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 10.03 | | | | 0.11 | % | | $ | 13,307 | | | | 1.70 | %(8) | | | 1.71 | %(8) | | | (1.44 | %)(8) | | | (1.45 | %)(8) | | | 0.00 | % | | | | |
| $ | 10.42 | | | | 5.15 | % | | $ | 17,024 | | | | 1.71 | % | | | 1.70 | % | | | (1.65 | %) | | | (1.64 | %) | | | 0.00 | % | | | | |
| $ | 10.01 | | | | 2.65 | % | | $ | 13,925 | | | | 1.75 | % | | | 1.77 | % | | | (1.69 | %) | | | (1.71 | %) | | | 34.92 | % | | | | |
| $ | 10.64 | | | | 8.99 | %(5) | | $ | 13,246 | | | | 1.95 | %(6) | | | 1.90 | %(6) | | | (1.91 | %)(6) | | | (1.86 | %)(6) | | | 33.66 | %(5) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 10.74 | | | | 1.81 | % | | $ | 180,870 | | | | 0.11 | % | | | N/A | | | | (0.11 | %) | | | N/A | | | | 16.43 | % | | | | |
| $ | 10.69 | | | | 5.81 | % | | $ | 145,606 | | | | 0.13 | % | | | N/A | | | | 0.98 | % | | | N/A | | | | 16.83 | % | | | | |
| $ | 10.50 | | | | 6.02 | % | | $ | 164,687 | | | | 0.13 | % | | | N/A | | | | 4.91 | % | | | N/A | | | | 6.46 | % | | | | |
| $ | 10.40 | | | | 6.42 | %(5) | | $ | 146,296 | | | | 0.26 | %(6) | | | N/A | | | | 5.29 | %(6) | | | N/A | | | | 0.62 | %(5) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 10.71 | | | | 1.72 | % | | $ | 32,696 | | | | 0.26 | % | | | N/A | | | | (0.26 | %) | | | N/A | | | | 16.43 | % | | | | |
| $ | 10.67 | | | | 5.57 | % | | $ | 52,988 | | | | 0.27 | % | | | N/A | | | | 1.02 | % | | | N/A | | | | 16.83 | % | | | | |
| $ | 10.50 | | | | 5.88 | % | | $ | 108,003 | | | | 0.28 | % | | | N/A | | | | 4.82 | % | | | N/A | | | | 6.46 | % | | | | |
| $ | 10.40 | | | | 6.36 | %(5) | | $ | 80,018 | | | | 0.41 | %(6) | | | N/A | | | | 5.37 | %(6) | | | N/A | | | | 0.62 | %(5) | | | | |
| | | | |
| | The accompanying footnotes are an integral part of these financial statements. | | (Continued) |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
59
| | |
| Financial Highlights | | October 31, 2016 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | PER SHARE DATA: | |
| | | Income (Loss) from Investment Operations | | | Distributions to Shareholders | |
| | | Net Asset
Value,
Beginning
of Period | | | Net
Investment
Income
(Loss) (3) | | | Net Realized
and Unrealized
Gains (Losses) | | | Total from
Investment
Operations | | | Net
Investment
Income | | | Net
Realized
Gains | | | Return
of Capital | | | Total
Distributions | |
| STONE RIDGE INTERNATIONAL DEVELOPED MARKETS VARIANCE RISK PREMIUM FUND—CLASS I | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended October 31, 2016 | | $ | 9.93 | | | | (0.16 | ) | | | 0.07 | | | | (0.09 | ) | | | — | | | | (0.16 | ) | | | — | | | | (0.16 | ) |
| Year Ended October 31, 2015 | | $ | 9.70 | | | | (0.19 | ) | | | 0.52 | | | | 0.33 | | | | — | | | | (0.10 | ) | | | — | | | | (0.10 | ) |
Period Ended
October 31, 2014(1) | | $ | 10.00 | | | | (0.12 | ) | | | 0.17 | | | | 0.05 | (6) | | | — | | | | (0.19 | ) | | | (0.16 | ) | | | (0.35 | ) |
| STONE RIDGE INTERNATIONAL DEVELOPED MARKETS VARIANCE RISK PREMIUM FUND—CLASS M | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended October 31, 2016 | | $ | 9.91 | | | | (0.17 | ) | | | 0.07 | | | | (0.10 | ) | | | — | | | | (0.16 | ) | | | — | | | | (0.16 | ) |
| Year Ended October 31, 2015 | | $ | 9.69 | | | | (0.20 | ) | | | 0.52 | | | | 0.32 | | | | — | | | | (0.10 | ) | | | — | | | | (0.10 | ) |
Period Ended
October 31, 2014(1) | | $ | 10.00 | | | | (0.13 | ) | | | 0.17 | | | | 0.04 | (6) | | | — | | | | (0.19 | ) | | | (0.16 | ) | | | (0.35 | ) |
| STONE RIDGE EMERGING MARKETS VARIANCE RISK PREMIUM FUND—CLASS I | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended October 31, 2016 | | $ | 8.83 | | | | (0.10 | ) | | | 0.33 | | | | 0.23 | | | | — | | | | — | | | | — | | | | — | |
| Year Ended October 31, 2015 | | $ | 9.95 | | | | (0.15 | ) | | | (0.87 | ) | | | (1.02 | ) | | | — | | | | — | | | | (0.10 | ) | | | (0.10 | ) |
Period Ended
October 31, 2014(1) | | $ | 10.00 | | | | (0.11 | ) | | | 0.40 | | | | 0.29 | (6) | | | — | | | | (0.34 | ) | | | (0.01 | ) | | | (0.35 | ) |
| STONE RIDGE EMERGING MARKETS VARIANCE RISK PREMIUM FUND—CLASS M | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended October 31, 2016 | | $ | 8.81 | | | | (0.11 | ) | | | 0.32 | | | | 0.21 | | | | — | | | | — | | | | — | | | | — | |
| Year Ended October 31, 2015 | | $ | 9.94 | | | | (0.16 | ) | | | (0.87 | ) | | | (1.03 | ) | | | — | | | | — | | | | (0.10 | ) | | | (0.10 | ) |
Period Ended
October 31, 2014(1) | | $ | 10.00 | | | | (0.12 | ) | | | 0.41 | | | | 0.29 | | | | — | | | | (0.34 | ) | | | (0.01 | ) | | | (0.35 | ) |
| STONE RIDGE INTERNATIONAL VARIANCE RISK PREMIUM MASTER FUND—CLASS I | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended October 31, 2016 | | $ | 9.51 | | | | (0.02 | )(4) | | | 0.02 | (4) | | | 0.00 | (4) | | | — | | | | — | | | | — | | | | — | |
| Year Ended October 31, 2015 | | $ | 9.76 | | | | 0.05 | (4) | | | (0.21 | )(4) | | | (0.16 | )(4) | | | (0.05 | ) | | | — | | | | (0.04 | ) | | | (0.09 | ) |
Period Ended
October 31, 2014(1) | | $ | 10.00 | | | | 0.34 | (4) | | | (0.24 | )(4) | | | 0.09 | (4) | | | (0.24 | ) | | | — | | | | (0.10 | ) | | | (0.34 | ) |
| STONE RIDGE INTERNATIONAL VARIANCE RISK PREMIUM MASTER FUND—CLASS M | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended October 31, 2016 | | $ | 9.50 | | | | (0.04 | )(4) | | | 0.03 | (4) | | | (0.01 | )(4) | | | — | | | | — | | | | — | | | | — | |
| Year Ended October 31, 2015 | | $ | 9.76 | | | | 0.06 | (4) | | | (0.23 | )(4) | | | (0.17 | )(4)(6) | | | (0.05 | ) | | | — | | | | (0.04 | ) | | | (0.09 | ) |
Period Ended
October 31, 2014(1) | | $ | 10.00 | | | | 0.32 | (4) | | | (0.24 | )(4) | | | 0.07 | (4)(6) | | | (0.22 | ) | | | — | | | | (0.10 | ) | | | (0.32 | ) |
| STONE RIDGE GLOBAL EQUITY VARIANCE RISK PREMIUM MASTER FUND—CLASS I | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended October 31, 2016 | | $ | 10.07 | | | | (0.02 | )(5) | | | 0.11 | (5) | | | 0.09 | (5) | | | — | | | | (0.15 | ) | | | — | | | | (0.15 | ) |
Period Ended
October 31, 2015(2) | | $ | 10.00 | | | | 0.04 | (5) | | | 0.08 | (5) | | | 0.12 | (5)(6) | | | (0.05 | ) | | | — | | | | — | | | | (0.05 | ) |
| STONE RIDGE GLOBAL EQUITY VARIANCE RISK PREMIUM MASTER FUND—CLASS M | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended October 31, 2016 | | $ | 10.06 | | | | (0.04 | )(5) | | | 0.11 | (5) | | | 0.07 | (5) | | | — | | | | (0.15 | ) | | | — | | | | (0.15 | ) |
Period Ended
October 31, 2015(2) | | $ | 10.00 | | | | (0.01 | )(5) | | | 0.11 | (5) | | | 0.10 | (5) | | | (0.04 | ) | | | — | | | | — | | | | (0.04 | ) |
| | (1) | | The Fund commenced operations on February 11, 2014. |
| | (2) | | The Fund commenced operations on November 14, 2014. |
| | (3) | | Net investment income (loss) per share has been calculated based on average shares outstanding during the period. |
| | (4) | | Per share amounts only include income and expenses of the Stone Ridge International Variance Risk Premium Master Fund which are shown on the Fund’s Statement of Operations. Amounts do not include the Fund’s proportionate share of the income and expenses of the underlying investor funds. |
| | (5) | | Per share amounts only include income and expenses of the Stone Ridge Global Equity Variance Risk Premium Master Fund which are shown on the Fund’s Statement of Operations. Amounts do not include the Fund’s proportionate share of the income and expenses of the underlying investor funds. |
| | (6) | | Includes redemption fees of less than $0.01 per share. |
| | (9) | | Total Return represents the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). |
| | (10) | | Includes borrowing and investment-related expenses not covered by the Funds’ expense limitation agreement. See Note 4. |
| | | | |
| | The accompanying footnotes are an integral part of these financial statements. | | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
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60
| | |
| Financial Highlights | | October 31, 2016 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | SUPPLEMENT DATA AND RATIOS: | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Asset
Value,
End of Period | | | Total
Return(9) | | | Net Assets,
End of Period
(000’s) | | | Ratio of Expenses
to Average Net Assets
(Before Expense
Reimbursement/Recoupment) | | | Ratio of Expenses
to Average Net Assets
(After Expense
Reimbursement/Recoupment) | | | Ratio of Net Investment Income
(Loss) to Average Net Assets
(Before Expense
Reimbursement/Recoupment) | | | Ratio of Net Investment Income
(Loss) to Average Net Assets
(After Expense
Reimbursement/Recoupment) | | | Portfolio
Turnover Rate | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 9.68 | | | | (0.89 | %) | | $ | 77,284 | | | | 1.81 | %(10) | | | 1.90 | %(10) | | | (1.57 | %)(10) | | | (1.66 | %)(10) | | | 115.09 | % | | | | |
| $ | 9.93 | | | | 3.40 | % | | $ | 90,449 | | | | 1.83 | %(10) | | | 1.96 | %(10) | | | (1.77 | %)(10) | | | (1.90 | %)(10) | | | 107.43 | % | | | | |
| $ | 9.70 | | | | 0.47 | %(7) | | $ | 59,551 | | | | 2.16 | %(8) | | | 1.75 | %(8) | | | (2.12 | %)(8) | | | (1.71 | %)(8) | | | 70.35 | %(7) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 9.65 | | | | (0.99 | %) | | $ | 19,530 | | | | 1.96 | %(10) | | | 2.05 | %(10) | | | (1.72 | %)(10) | | | (1.81 | %)(10) | | | 115.09 | % | | | | |
| $ | 9.91 | | | | 3.30 | % | | $ | 21,082 | | | | 1.98 | %(10) | | | 2.11 | %(10) | | | (1.92 | %)(10) | | | (2.05 | %)(10) | | | 107.43 | % | | | | |
| $ | 9.69 | | | | 0.36 | %(7) | | $ | 18,795 | | | | 2.35 | %(8) | | | 1.90 | %(8) | | | (2.31 | %)(8) | | | (1.86 | %)(8) | | | 70.35 | %(7) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 9.06 | | | | 2.60 | % | | $ | 45,164 | | | | 1.79 | %(10) | | | 1.80 | %(10) | | | (1.15 | %)(10) | | | (1.16 | %)(10) | | | 160.98 | % | | | | |
| $ | 8.83 | | | | (10.37 | %) | | $ | 47,338 | | | | 2.09 | % | | | 1.80 | % | | | (1.92 | %) | | | (1.63 | %) | | | 485.70 | % | | | | |
| $ | 9.95 | | | | 3.05 | %(7) | | $ | 36,142 | | | | 2.41 | %(8) | | | 1.80 | %(8) | | | (2.07 | %)(8) | | | (1.46 | %)(8) | | | 229.94 | %(7) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 9.02 | | | | 2.38 | % | | $ | 3,541 | | | | 1.92 | %(10) | | | 1.95 | %(10) | | | (1.30 | %)(10) | | | (1.31 | %)(10) | | | 160.98 | % | | | | |
| $ | 8.81 | | | | (10.48 | %) | | $ | 3,079 | | | | 2.22 | % | | | 1.95 | % | | | (2.07 | %) | | | (1.80 | %) | | | 485.70 | % | | | | |
| $ | 9.94 | | | | 2.95 | %(7) | | $ | 3,702 | | | | 2.84 | %(8) | | | 1.95 | %(8) | | | (2.50 | %)(8) | | | (1.61 | %)(8) | | | 229.94 | %(7) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 9.51 | | | | 0.00 | % | | $ | 7,518 | | | | 0.58 | % | | | 0.25 | % | | | (0.58 | %) | | | (0.25 | %) | | | 11.65 | % | | | | |
| $ | 9.51 | | | | (1.63 | %) | | $ | 9,536 | | | | 0.47 | % | | | 0.25 | % | | | 0.33 | % | | | 0.55 | % | | | 13.94 | % | | | | |
| $ | 9.76 | | | | 0.92 | %(7) | | $ | 5,971 | | | | 0.82 | %(8) | | | 0.25 | %(8) | | | 4.20 | %(8) | | | 4.77 | %(8) | | | 21.41 | %(7) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 9.49 | | | | (0.11 | %) | | $ | 4,269 | | | | 0.69 | % | | | 0.40 | % | | | (0.69 | %) | | | (0.40 | %) | | | 11.65 | % | | | | |
| $ | 9.50 | | | | (1.77 | %) | | $ | 19,894 | | | | 0.62 | % | | | 0.40 | % | | | 0.36 | % | | | 0.58 | % | | | 13.94 | % | | | | |
| $ | 9.76 | | | | 0.82 | %(7) | | $ | 19,533 | | | | 0.98 | %(8) | | | 0.40 | %(8) | | | 3.93 | %(8) | | | 4.51 | %(8) | | | 21.41 | %(7) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 10.01 | | | | 0.92 | % | | $ | 33,414 | | | | 0.39 | % | | | 0.25 | % | | | (0.39 | %) | | | (0.25 | %) | | | 21.71 | % | | | | |
| $ | 10.07 | | | | 1.17 | %(7) | | $ | 38,899 | | | | 0.47 | %(8) | | | 0.25 | %(8) | | | 0.21 | %(8) | | | 0.43 | %(8) | | | 62.45 | %(7) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| $ | 9.98 | | | | 0.71 | % | | $ | 7,351 | | | | 0.53 | % | | | 0.40 | % | | | (0.53 | %) | | | (0.40 | %) | | | 21.71 | % | | | | |
| $ | 10.06 | | | | 1.05 | %(7) | | $ | 9,464 | | | | 0.72 | %(8) | | | 0.40 | %(8) | | | (0.42 | %)(8) | | | (0.10 | %)(8) | | | 62.45 | %(7) | | | | |
| | | | |
| | The accompanying footnotes are an integral part of these financial statements. | | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
61
| | |
| Notes to Financial Statements | | October 31, 2016 |
1. Organization
Stone Ridge Trust (the “Trust”) was organized as a Delaware statutory trust on September 28, 2012, and is registered under the Investment Company Act of 1940 (the “1940 Act”), as amended, as an open-end management investment company issuing shares in multiple series, each series representing a distinct portfolio with its own investment objectives and policies. As of October 31, 2016, the Trust consisted of nine series (the “Funds”): the Stone Ridge Reinsurance Risk Premium Fund (the “Reinsurance Fund”), the Stone Ridge High Yield Reinsurance Risk Premium Fund (the “High Yield Fund”, together with the Reinsurance Fund the “Reinsurance Funds”), the Stone Ridge U.S. Large Cap Variance Risk Premium Fund (the “U.S. Large Cap VRP Fund”), the Stone Ridge U.S. Small Cap Variance Risk Premium Fund (the “U.S. Small Cap VRP Fund”, together with the U.S. Large Cap VRP Fund, the “U.S. VRP Funds”), the Stone Ridge U.S. Variance Risk Premium Master Fund (the “U.S. VRP Master Fund”, together with the U.S. VRP Funds, the “U.S. VRP Portfolio of Funds”), the Stone Ridge International Developed Markets Variance Risk Premium Fund (the “International Developed Markets VRP Fund”), the Stone Ridge Emerging Markets Variance Risk Premium Fund (the “Emerging Markets VRP Fund”, together with the International Developed Markets VRP Fund, the “International VRP Funds”), the Stone Ridge International Variance Risk Premium Master Fund (the “International VRP Master Fund”) and the Stone Ridge Global Equity Variance Risk Premium Master Fund (the “Global Equity VRP Master Fund”, together with the International VRP Funds and the International VRP Master Fund, the “International VRP Portfolio of Funds”). Each of the U.S. VRP Funds is diversified. Each other Fund is non-diversified. The Reinsurance Funds commenced operations on February 1, 2013. The U.S. VRP Funds commenced operations on May 1, 2013. The U.S. VRP Master Fund commenced operations on May 22, 2013. The International Developed Markets VRP Fund, Emerging Markets VRP Fund and International VRP Master Fund commenced operations on February 11, 2014. The Global Equity VRP Master Fund commenced operations on November 14, 2014. Each Fund offers two classes of shares to investors: Class I shares, with no front-end or back-end sales charges, and no 12b-1 fees; and Class M Shares, with no front-end or back-end sales charges, and a 0.15% 12b-1 fee. The Reinsurance Funds, the U.S. VRP Funds, and the VRP Master Fund do not charge redemption fees. The International VRP Portfolio of Funds did charge redemption fees, but the redemption fees were discontinued effective February 28, 2015. There are an unlimited number of authorized shares.
The investment objective of each of the Reinsurance Funds is to seek a high level of total return consisting of income and capital appreciation. Each of the Reinsurance Funds pursues its investment objective by investing primarily in reinsurance-related securities, including event-linked bonds, preference shares or participation notes issued in connection with quota shares (“Quota Share Notes”), preference shares or participation notes issued in connection with excess-of-loss, stop-loss or other non-proportional reinsurance (“Excess of Loss Notes”), preference shares or participation notes issued in connection with industry loss warrants (“ILW Notes”) and, to a lesser extent, event-linked swaps, equity securities (publicly or privately offered) and the derivatives of equity securities of companies in the reinsurance and insurance industry (collectively, “reinsurance-related securities”). The investment objective of each of the U.S. VRP Portfolio of Funds is to seek capital appreciation. The U.S. Large Cap VRP Fund typically pursues its investment objective by writing (selling) call and put options related to U.S. large-cap securities. The U.S. Small Cap VRP Fund typically pursues its investment objective by writing (selling) call and put options related to U.S. small-cap securities. The U.S. VRP Master Fund seeks to achieve its investment objective by investing in the U.S. VRP Funds. The investment objective of each of the International VRP Portfolio of Funds is to seek capital appreciation. The International Developed Markets VRP Fund typically pursues its objective by writing (selling) call and put options related to developed markets securities. The Emerging Markets VRP Fund typically pursues its objective by writing (selling) call and put options related to emerging markets securities. The International VRP Master Fund seeks to achieve its investment objective by investing in the International VRP Funds. The Global Equity VRP Master Fund seeks to achieve its investment objective by investing in the International VRP Funds and the U.S. VRP Funds.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The Funds are investment companies and apply specific accounting and financial reporting requirements under Financial Accounting Standards Board (“FASB”) Accounting Standards Topic 946, Financial Services – Investment Companies.
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
62
| | |
| Notes to Financial Statements | | October 31, 2016 |
a) Investment Valuation and Fair Value Measurement In determining the net asset value (“NAV”) of the Funds’ shares, securities which are traded on a domestic national stock exchange are valued at the last sale price each day on the securities exchange on which the securities are primarily traded. Securities traded principally on the NASDAQ Stock Market are normally valued at the NASDAQ Official Closing Price provided by NASDAQ each business day.
Exchange-traded securities for which there were no transactions are valued at the mean between the bid and asked price on the primary exchange on which they are traded. Non-exchange traded equity securities are valued at the last sale price in the over-the-counter market. If a non-exchange traded equity does not trade on a particular day, the mean between the closing bid and asked prices is used.
Investments in open-end mutual funds, including money market funds, are generally priced at the ending NAV provided by the service agent of the Trust. Investments in closed-end mutual funds are valued at the last sale price on the exchange on which the shares are primarily traded.
Futures contracts are valued at the settlement price on the exchange on which they are primarily traded.
Short-term debt securities issued with a maturity of less than 60 days, including U.S. Treasury securities, are valued at amortized cost which approximates fair value.
Other debt securities, including corporate and government debt securities (of U.S. or foreign issuers) and municipal debt securities in each case having a remaining maturity in excess of 60 days, loans, mortgage-backed securities, collateralized mortgage obligations, and other asset backed securities (except event-linked bonds) are valued by an independent pricing service at an evaluated (or estimated) mean between the closing bid and asked prices.
With respect to pricing of event-linked securities or similar insurance- or reinsurance-related restricted securities (including participation notes and preference shares) for which at least one independent market-maker or two independent brokers regularly provide firm bids, each Fund will utilize an independent data delivery vendor to aggregate and provide this pricing data to the Fund’s administrator. If the independent data delivery vendor pricing service cannot obtain independent firm bids for such securities, but there is an independent market maker or independent brokers who will supply firm bids for such securities, then the Adviser (as defined herein) may supply the Fund’s administrator with a contact from whom to obtain such bids. If, with respect to such securities, such independent firm bids are not available, but at least one independent firm or indicative bid is available, then the Valuation Committee may use that bid (or the average of those bids if more than one) as the value of the security if the Valuation Committee determines that such value is reasonable, and may consider internal and/or independent external models in making that determination.
If market quotations are not readily available (including in cases where available market quotations are deemed to be unreliable or infrequent), the Funds’ investments will be valued as determined in good faith pursuant to policies and procedures approved by the Board of Trustees (“fair value pricing”). In these circumstances, the Funds determine fair value in a manner that fairly reflects the market value of the security on the valuation date based on consideration of any information or factors it deems appropriate as further described below. The Valuation Committee has the responsibility for overseeing the implementation of the Funds’ valuation procedures and fair value determinations made on behalf of the Board of Trustees. For purposes of determining fair value of securities, the Valuation Committee may use (or make use of) a variety of valuation methodologies, including, without limitation: (i) mathematical techniques that refer to the prices of similar or related securities; (ii) a percentage increase or decrease across all securities of a region, country or industry affected by a significant event; (iii) a multiple of earnings; (iv) a discount from market of a similar freely traded security; (v) the yield to maturity of debt securities; (vi) the recommendation of a pricing service; (vii) a single broker’s (or insurance company’s) quote; (viii) recent primary and/or secondary market transactions that the Funds believe to be comparable; (ix) modeling or development of events; or (x) any combination of the above. Fair value pricing may require subjective determinations about the value of a security or other asset. Fair values used to determine the Funds’ NAVs may differ from quoted or published prices, or from prices that are used by others, for the same investments. The use of fair value pricing may not always result in adjustments to the prices of securities or other assets or liabilities held by the Funds and it is possible that the fair value determined for a security may be materially different than the value that could be realized upon the sale of such security.
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
63
| | |
| Notes to Financial Statements | | October 31, 2016 |
Exchange-traded options are valued at the settlement price on the exchange or mean of the bid and asked prices. Over-the-counter options are valued based on quotations obtained from an independent pricing service or from a broker (typically the counterparty to the option).
Trading in securities on non-North American securities exchanges normally is completed before the calculation of the Funds’ NAV. Trading on these foreign exchanges may not take place on all days on which there is regular trading on the New York Stock Exchange (“NYSE”), or may take place on days on which there is no regular trading on the NYSE. Similarly, the Funds may hold securities traded in domestic markets where the market may close early on a given day prior to calculation of the Funds’ NAV. Events affecting the value of such securities held by the Funds that occur between the close of trading in the security and the close of trading on the NYSE normally will not be reflected in the Funds’ calculation of the NAV. Significant events will be closely monitored, and where it is determined that an adjustment should be made to the security’s value because significant interim events may materially affect the value of the security, the security will be priced at its fair value in accordance with the procedures approved by the Board of Trustees.
In determining whether a significant event has occurred with respect to securities traded principally in foreign markets, the Funds will monitor the index futures market associated with that foreign country. If the index futures, which are continuously traded, fluctuate by more than a predetermined range between the time of the closing of the equity or options exchange and the closing of the NYSE, the Funds may use fair valuation in accordance with the procedures approved by the Board of Trustees.
The Funds have adopted authoritative fair valuation accounting standards which establish an authoritative definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion of changes in valuation techniques and related inputs during the period. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
Level 1: Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access at the measurement date;
Level 2: Significant inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not considered to be active and firm bids from brokers or market makers which are not publically available;
Level 3: Significant inputs that are unobservable.
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Adviser. The Adviser considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the Adviser’s perceived risk of that instrument.
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
64
| | |
| Notes to Financial Statements | | October 31, 2016 |
Transfers between levels are recognized at the end of the reporting period. There were no transfers between levels during the reporting period. The following tables summarize the inputs used to value the Funds’ investments as of October 31, 2016.
| | | | | | | | | | | | | | | | |
| DESCRIPTION | | LEVEL 1 | | | LEVEL 2 | | | LEVEL 3 | | | TOTAL | |
| Reinsurance Fund | | | | | | | | | | | | | | | | |
Assets | | | | | | | | | | | | | | | | |
| Event-Linked Bonds | | | | | | | | | | | | | | | | |
China | | $ | — | | | $ | — | | | $ | 1,397,615 | | | $ | 1,397,615 | |
Europe | | | — | | | | 5,517,715 | | | | — | | | | 5,517,715 | |
Global | | | — | | | | 292,752,484 | | | | 24,729,128 | | | | 317,481,612 | |
Japan | | | — | | | | 39,080,467 | | | | — | | | | 39,080,467 | |
Turkey | | | — | | | | 3,280,550 | | | | — | | | | 3,280,550 | |
United States | | | — | | | | 499,567,631 | | | | 14,386,089 | | | | 513,953,720 | |
Total Event-Linked Bonds | | | — | | | | 840,198,847 | | | | 40,512,832 | | | | 880,711,679 | |
Participation Notes (1) | | | — | | | | — | | | | 105,688,401 | | | | 105,688,401 | |
Preference Shares (1) | | | — | | | | — | | | | 97,605,483 | | | | 97,605,483 | |
Money Market Funds | | | 105,508 | | | | — | | | | — | | | | 105,508 | |
| | | | |
Total Assets | | $ | 105,508 | | | $ | 840,198,847 | | | $ | 243,806,716 | | | $ | 1,084,111,071 | |
Other Financial Instruments* | | | | | | | | | | | | | | | | |
Unrealized appreciation on futures | | $ | 649,716 | | | $ | — | | | $ | — | | | $ | 649,716 | |
Unrealized depreciation on futures | | | (44,487 | ) | | | — | | | | — | | | | (44,487 | ) |
| | | | |
Total | | $ | 605,229 | | | $ | — | | | $ | — | | | $ | 605,229 | |
| | | | | | | | | | | | | | | | |
| High Yield Fund | | | | | | | | | | | | | | | | |
Assets | | | | | | | | | | | | | | | | |
| Event-Linked Bonds | | | | | | | | | | | | | | | | |
China | | $ | — | | | $ | — | | | $ | 668,294 | | | $ | 668,294 | |
Global | | | — | | | | 118,317,562 | | | | 15,762,889 | | | | 134,080,451 | |
Japan | | | — | | | | 1,821,843 | | | | — | | | | 1,821,843 | |
United States | | | — | | | | 263,747,647 | | | | 4,341,239 | | | | 268,088,886 | |
Total Event-Linked Bonds | | | — | | | | 383,887,052 | | | | 20,772,422 | | | | 404,659,474 | |
Participation Notes (1) | | | — | | | | — | | | | 41,943,248 | | | | 41,943,248 | |
Preference Shares (1) | | | — | | | | — | | | | 51,105,574 | | | | 51,105,574 | |
Money Market Funds | | | 221,521 | | | | — | | | | — | | | | 221,521 | |
| | | | |
Total Assets | | $ | 221,521 | | | $ | 383,887,052 | | | $ | 113,821,244 | | | $ | 497,929,817 | |
Other Financial Instruments* | | | | | | | | | | | | | | | | |
Unrealized appreciation on futures | | $ | 59,701 | | | $ | — | | | $ | — | | | $ | 59,701 | |
Unrealized depreciation on futures | | | (20,533 | ) | | | — | | | | — | | | | (20,533 | ) |
| | | | |
Total | | $ | 39,168 | | | $ | — | | | $ | — | | | $ | 39,168 | |
| | | | | | | | | | | | | | | | |
| U.S. Large Cap VRP Fund | | | | | | | | | | | | | | | | |
Assets | | | | | | | | | | | | | | | | |
Contingent Value Rights (1) | | $ | — | | | $ | — | | | $ | 5,744 | | | $ | 5,744 | |
Money Market Funds | | | 553,943 | | | | — | | | | — | | | | 553,943 | |
U.S. Treasury Bills | | | — | | | | 381,496,161 | | | | — | | | | 381,496,161 | |
| | | | |
Total Assets | | $ | 553,943 | | | $ | 381,496,161 | | | $ | 5,744 | | | $ | 382,055,848 | |
Liabilities | | | | | | | | | | | | | | | | |
Written Options | | $ | (1,219,075 | ) | | $ | (649,070 | ) | | $ | — | | | $ | (1,868,145 | ) |
| | | | |
Total Liabilities | | $ | (1,219,075 | ) | | $ | (649,070 | ) | | $ | — | | | $ | (1,868,145 | ) |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
65
| | |
| Notes to Financial Statements | | October 31, 2016 |
| | | | | | | | | | | | | | | | |
| DESCRIPTION | | LEVEL 1 | | | LEVEL 2 | | | LEVEL 3 | | | TOTAL | |
| U.S. Small Cap VRP Fund | | | | | | | | | | | | | | | | |
Assets | | | | | | | | | | | | | | | | |
Contingent Value Rights (1) | | $ | — | | | $ | — | | | $ | 6,804 | | | $ | 6,804 | |
U.S. Treasury Bills | | | — | | | | 129,053,774 | | | | — | | | | 129,053,774 | |
| | | | |
Total Assets | | $ | — | | | $ | 129,053,774 | | | $ | 6,804 | | | $ | 129,060,578 | |
Liabilities | | | | | | | | | | | | | | | | |
Written Options | | $ | — | | | $ | (759,200 | ) | | $ | — | | | $ | (759,200 | ) |
| | | | |
Total Liabilities | | $ | — | | | $ | (759,200 | ) | | $ | — | | | $ | (759,200 | ) |
| | | | | | | | | | | | | | | | |
| U.S. VRP Master Fund (2) | | | | | | | | | | | | | | | | |
Assets | | | | | | | | | | | | | | | | |
Investment Companies—Open End | | $ | 213,673,472 | | | $ | — | | | $ | — | | | $ | 213,673,472 | |
Money Market Funds | | | 223,715 | | | | — | | | | — | | | | 223,715 | |
| | | | |
Total Assets | | $ | 213,897,187 | | | $ | — | | | $ | — | | | $ | 213,897,187 | |
| | | | | | | | | | | | | | | | |
| International Developed Markets VRP Fund (2) | | | | | | | | | | | | | | | | |
Assets | | | | | | | | | | | | | | | | |
Money Market Funds | | $ | 7,170,818 | | | $ | — | | | $ | — | | | $ | 7,170,818 | |
U.S. Treasury Bills | | | — | | | | 90,771,380 | | | | — | | | | 90,771,380 | |
| | | | |
Total Assets | | $ | 7,170,818 | | | $ | 90,771,380 | | | $ | — | | | $ | 97,942,198 | |
Liabilities | | | | | | | | | | | | | | | | |
Written Options | | $ | (1,154,029 | ) | | $ | — | | | $ | — | | | $ | (1,154,029 | ) |
| | | | |
Total Liabilities | | $ | (1,154,029 | ) | | $ | — | | | $ | — | | | $ | (1,154,029 | ) |
| | | | | | | | | | | | | | | | |
| Emerging Markets VRP Fund (2) | | | | | | | | | | | | | | | | |
Assets | | | | | | | | | | | | | | | | |
Money Market Funds | | $ | 30,538 | | | $ | — | | | $ | — | | | $ | 30,538 | |
U.S. Treasury Bills | | | — | | | | 49,426,912 | | | | — | | | | 49,426,912 | |
| | | | |
Total Assets | | $ | 30,538 | | | $ | 49,426,912 | | | $ | — | | | $ | 49,457,450 | |
Liabilities | | | | | | | | | | | | | | | | |
Written Options | | $ | — | | | $ | (652,199 | ) | | $ | — | | | $ | (652,199 | ) |
| | | | |
Total Liabilities | | $ | — | | | $ | (652,199 | ) | | $ | — | | | $ | (652,199 | ) |
| | | | | | | | | | | | | | | | |
| International VRP Master Fund (2) | | | | | | | | | | | | | | | | |
Assets | | | | | | | | | | | | | | | | |
Investment Companies—Open End | | $ | 11,748,913 | | | $ | — | | | $ | — | | | $ | 11,748,913 | |
Money Market Funds | | | 76,942 | | | | — | | | | — | | | | 76,942 | |
| | | | |
Total Assets | | $ | 11,825,855 | | | $ | — | | | $ | — | | | $ | 11,825,855 | |
| | | | | | | | | | | | | | | | |
| Global Equity VRP Master Fund (2) | | | | | | | | | | | | | | | | |
Assets | | | | | | | | | | | | | | | | |
Investment Companies—Open End | | $ | 40,630,906 | | | $ | — | | | $ | — | | | $ | 40,630,906 | |
Money Market Funds | | | 238,909 | | | | — | | | | — | | | | 238,909 | |
| | | | |
Total Assets | | $ | 40,869,815 | | | $ | — | | | $ | — | | | $ | 40,869,815 | |
| * | Other financial instruments are derivatives, such as futures. These instruments are reflected at the unrealized appreciation (depreciation) on the instrument. |
| (1) | For further security characteristics, see the Funds’ Schedules of Investments. |
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| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
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66
| | |
| Notes to Financial Statements | | October 31, 2016 |
| (2) | The Fund measures Level 3 activity as of the beginning and end of each financial reporting period. For the period ended October 31, 2016, the Fund did not have unobservable inputs (Level 3 securities) used in determining fair value. Therefore, a reconciliation of assets and liabilities in which significant inputs (Level 3 securities) were used in determining fair value is not applicable. |
Below is a reconciliation that details the activity of securities in Level 3 during the year ended October 31, 2016:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | REINSURANCE FUND | | | HIGH YIELD FUND | | | U.S. LARGE
CAP VRP
FUND | | | U.S. SMALL
CAP VRP
FUND | |
| | | EVENT-
LINKED
BONDS | | | PARTICIPATION
NOTES | | | PREFERENCE
SHARES | | | EVENT-
LINKED
BONDS | | | PARTICIPATION
NOTES | | | PREFERENCE
SHARES | | | CONTINGENT
VALUE
RIGHTS | | | CONTINGENT
VALUE
RIGHTS | |
Beginning Balance—November 1, 2015 | | $ | 22,311,326 | | | $ | 102,545,159 | | | $ | 82,072,719 | | | $ | 15,227,217 | | | $ | 43,703,346 | | | $ | 48,114,789 | | | $ | 5,744 | | | $ | 11,689 | |
Acquisition | | | 25,746,745 | | | | 69,617,997 | | | | 20,257,201 | | | | 9,521,433 | | | | 22,374,512 | | | | 3,730,000 | | | | — | | | | 6,396 | |
Dispositions | | | (8,907,456 | ) | | | (64,079,556 | ) | | | (5,189,095 | ) | | | (4,583,740 | ) | | | (22,554,316 | ) | | | (2,207,974 | ) | | | — | | | | — | |
Realized gains/(losses) | | | 176,659 | | | | (123,626 | ) | | | — | | | | 85,948 | | | | (66,392 | ) | | | 23,229 | | | | — | | | | (4,885 | ) |
Return of capital | | | — | | | | (4,345,765 | ) | | | (262,863 | ) | | | — | | | | (1,656,684 | ) | | | (49,042 | ) | | | — | | | | — | |
Change in unrealized appreciation (depreciation) | | | 1,185,558 | | | | 2,074,192 | | | | 727,521 | | | | 521,564 | | | | 142,782 | | | | 1,494,572 | | | | — | | | | (6,396 | ) |
Transfers in/(out) of Level 3 | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Ending Balance—October 31, 2016 | | $ | 40,512,832 | | | $ | 105,688,401 | | | $ | 97,605,483 | | | $ | 20,772,422 | | | $ | 41,943,248 | | | $ | 51,105,574 | | | $ | 5,744 | | | $ | 6,804 | |
As of October 31, 2016, the change in unrealized appreciation (depreciation) on positions still held in the Reinsurance Fund, High Yield Fund, U.S. Large Cap VRP Fund and U.S. Small Cap VRP Fund were $5,933,005, $2,937,330, $0, and $(6,396) respectively.
Unobservable inputs included original transaction price, losses from severe weather events, other natural and non-natural catastrophes and changes in market risk spread of comparable securities (including catastrophe bonds with similar risk profiles). Significant increases in the market risk spread of comparable instruments or losses related to severe weather, other natural and non-natural catastrophes in isolation would result in a significantly lower fair value measurement. A high amount of loss from severe weather, other natural or non-natural catastrophes may also increase market risk spreads. Participation notes and preference shares are monitored daily for significant events that could affect the value of the instruments.
The following table summarizes the quantitative inputs used for investments categorized as Level 3 of the fair value hierarchy as of October 31, 2016.
Reinsurance Fund
| | | | | | | | | | | | | | | | |
| TYPE OF SECURITY | | INDUSTRY | | FAIR VALUE
AT 10/31/16 | | | VALUATION
TECHNIQUES | | UNOBSERVABLE
INPUTS | | RANGE | | WEIGHTED
AVERAGE | |
Participation Notes | | Financial Services | | | $43,486,076 | | | Insurance
industry loss
model | | Estimated Losses: Estimated premium earned: | | $0.0MM-$5.0MM
$0.0MM-$6.0MM | |
| $2.1MM
$2.8MM |
|
| | | | | | | | | | | | | | | | |
Preference Shares | | Financial Services | | | $67,482,319 | | | Insurance
industry loss
model | | Estimated losses: Estimated premium earned: | | $0.1MM-$4.0MM
$0.2MM-$4.4MM | |
| $1.1MM
$1.6MM |
|
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
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67
| | |
| Notes to Financial Statements | | October 31, 2016 |
High Yield Fund
| | | | | | | | | | | | | | | | |
| TYPE OF SECURITY | | INDUSTRY | | FAIR VALUE
AT 10/31/16 | | | VALUATION
TECHNIQUES | | UNOBSERVABLE
INPUTS | | RANGE | | WEIGHTED
AVERAGE | |
Participation Notes | | Financial Services | | | $24,631,679 | | | Insurance
industry loss
model | | Estimated losses: Estimated premium earned: | | $0.0MM-$3.1MM
$0.0MM-$3.7MM | |
| $1.2MM
$1.6MM |
|
| | | | | | | | | | | | | | | | |
Preference Shares | | Financial Services | | | $39,934,071 | | | Insurance
industry loss
model | | Estimated losses: Estimated premium earned: | | $0.0MM-$3.4MM
$0.1MM-$4.4MM | |
| $0.7MM
$1.0MM |
|
The level 3 securities held in the Reinsurance Fund and the High Yield Fund not listed above were priced using an indicative bid and amount to $132,838,321 for the Reinsurance Fund and $49,255,494 for the High Yield Fund.
Derivative Transactions — The Reinsurance Fund, High Yield Fund, U.S. Large Cap VRP Fund, U.S. Small Cap VRP Fund, International Developed Markets VRP Fund and the Emerging Markets VRP Fund engaged in derivatives for hedging and speculative purposes during the year ended October 31, 2016.
Futures Contracts — The Reinsurance Fund, High Yield Fund, U.S. Large Cap VRP Fund, U.S. Small Cap VRP Fund, International Developed Markets VRP Fund and the Emerging Markets VRP Fund may purchase and sell futures contracts. The Reinsurance Fund, High Yield Fund, U.S. Large Cap VRP Fund, U.S. Small Cap VRP Fund, International Developed Markets VRP Fund and the Emerging Markets VRP Fund held futures contracts during the year ended October 31, 2016. The U.S. Large Cap VRP Fund, U.S. Small Cap VRP Fund, International Developed Markets VRP Fund and Emerging Markets VRP Fund use futures contracts to maintain appropriate equity market exposure. The Reinsurance Fund and High Yield Fund use futures contracts to hedge interest rate and foreign exchange rate exposure. With futures, there is minimal counterparty credit risk to the Funds since futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees the futures against default. Upon entering into a contract, a Fund deposits and maintains as collateral, an initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, a Fund agrees to receive from or pay to the broker, an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by a Fund as unrealized gains and losses. Variation margin is settled daily. When the contract is closed, a Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. In connection with physically-settled futures contracts, a Fund is required under the 1940 Act to maintain assets consisting of cash, cash equivalents or liquid securities. The amount of the segregated assets is required to be adjusted daily to reflect the market value of the purchase obligation for long futures contracts or the market value of the instrument underlying the contract, but not less than the market price at which the futures contract was established, for short futures contracts.
The average notional amount of futures contracts during the year ended October 31, 2016, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | REINSURANCE
FUND | | | HIGH YIELD
FUND | | | U.S. LARGE CAP
VRP FUND | | | U.S. SMALL CAP
VRP FUND | | | INTERNATIONAL
DEVELOPED
MARKETS
VRP FUND | | | EMERGING
MARKETS
VRP FUND | |
| Total long futures contracts | | $ | 493,098 | | | $ | 246,664 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Total short futures contracts | | $ | 31,240,758 | | | $ | 7,897,430 | | | $ | 984,424 | | | $ | 854,294 | | | $ | 325,985 | | | $ | 302,885 | |
Options — The Funds may purchase and write call or put options on securities and indices and enter into related closing transactions. The U.S. Large Cap VRP Fund, U.S. Small Cap VRP Fund, International Developed Markets VRP Fund and the Emerging Markets VRP Fund wrote call or put options during the year ended October 31, 2016. The Funds write put and call options to earn premium income. With options, there is minimal counterparty credit risk to the Funds since options are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded options, guarantees the options against default. As the writer of a call option, the Funds have the obligation to sell the security at the exercise price during the exercise period. As a writer of a put option, the Funds have the obligation to buy the
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| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
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68
| | |
| Notes to Financial Statements | | October 31, 2016 |
underlying security at the exercise price during the exercise period. The premium that the Funds pay when purchasing a call option or receive when writing a call option will reflect, among other things, the market price of the security, the relationship of the exercise price to the market price of the security, the relationship of the exercise price to the volatility of the security, the length of the option period and supply and demand factors. The premium is the market value of the option.
A purchaser (holder) of a put option pays a non-refundable premium to the seller (writer) of a put option to obtain the right to sell a specified amount of a security at a fixed price (the exercise price) during a specified period (exercise period). Conversely, the seller (writer) of a put option, upon payment by the holder of the premium, has the obligation to buy the security from the holder of the put option at the exercise price during the exercise period. When an option is exercised, the premium originally received decreases the cost basis of the underlying security (or increases the proceeds on the security sold short) and the Funds realize a gain or loss from the sale of the security (or closing of the short sale).
Options on indices are similar to options on securities, except that upon exercise index options require cash payments and do not involve the actual purchase or sale of securities.
The average market values of written options for the year ended October 31, 2016, were as follows:
| | | | | | | | | | | | | | | | |
| | | U.S. LARGE CAP
VRP FUND | | | U.S. SMALL CAP
VRP FUND | | | INTERNATIONAL
DEVELOPED
MARKETS VRP
FUND | | | EMERGING
MARKETS
VRP FUND | |
Written Options | | $ | 1,768,020 | | | $ | 739,860 | | | $ | 1,536,314 | | | $ | 770,329 | |
Transactions in written options during the year ended October 31, 2016 were as follows:
| | | | | | | | | | | | | | | | |
| | | U.S. LARGE CAP VRP FUND | | | U.S. SMALL CAP VRP FUND | |
| Call Options | | CONTRACTS | | | PREMIUMS | | | CONTRACTS | | | PREMIUMS | |
Outstanding, beginning of year | | | 1,071 | | | $ | 46,278 | | | | 30 | | | $ | 5,098 | |
Options written | | | 40,232 | | | | 2,539,807 | | | | 985 | | | | 294,091 | |
Options terminated in closing transactions | | | (859 | ) | | | (227,462 | ) | | | (62 | ) | | | (20,087 | ) |
Options exercised | | | (4,404 | ) | | | (256,552 | ) | | | (253 | ) | | | (63,022 | ) |
Options expired | | | (36,040 | ) | | | (2,102,071 | ) | | | (700 | ) | | | (216,080 | ) |
| | | | | | | | |
Outstanding, end of year | | | — | | | $ | — | | | | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
| | | INTERNATIONAL DEVELOPED
MARKETS VRP FUND | | | EMERGING MARKETS
VRP FUND | |
| Call Options | | CONTRACTS | | | PREMIUMS | | | CONTRACTS | | | PREMIUMS | |
Outstanding, beginning of year | | | 4 | | | $ | 28 | | | | 42 | | | $ | 563 | |
Options written | | | 1,756 | | | | 19,927 | | | | 2,407 | | | | 30,531 | |
Options terminated in closing transactions | | | — | | | | — | | | | (7 | ) | | | (315 | ) |
Options exercised | | | (214 | ) | | | (2,143 | ) | | | (374 | ) | | | (4,757 | ) |
Options expired | | | (1,546 | ) | | | (17,812 | ) | | | (2,068 | ) | | | (26,022 | ) |
| | | | | | | | |
Outstanding, end of year | | | — | | | $ | — | | | | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
| | | U.S. LARGE CAP VRP FUND | | | U.S. SMALL CAP VRP FUND | |
| Put Options | | CONTRACTS | | | PREMIUMS | | | CONTRACTS | | | PREMIUMS | |
Outstanding, beginning of year | | | 1,464 | | | $ | 2,104,837 | | | | 1,048 | | | $ | 1,171,311 | |
Options written | | | 151,551 | | | | 198,987,820 | | | | 122,244 | | | | 104,516,713 | |
Options terminated in closing transactions | | | (100,171 | ) | | | (137,166,790 | ) | | | (85,898 | ) | | | (78,171,033 | ) |
Options exercised | | | (14,274 | ) | | | (19,740,262 | ) | | | (13,267 | ) | | | (9,749,258 | ) |
Options expired | | | (36,912 | ) | | | (42,056,997 | ) | | | (23,094 | ) | | | (16,534,283 | ) |
| | | | | | | | |
Outstanding, end of year | | | 1,658 | | | $ | 2,128,608 | | | | 1,033 | | | $ | 1,233,450 | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
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69
| | |
| Notes to Financial Statements | | October 31, 2016 |
| | | | | | | | | | | | | | | | |
| | | INTERNATIONAL DEVELOPED
MARKETS VRP FUND | | | EMERGING MARKETS
VRP FUND | |
| Put Options | | CONTRACTS | | | PREMIUMS | | | CONTRACTS | | | PREMIUMS | |
Outstanding, beginning of year | | | 1,620 | | | $ | 1,701,771 | | | | 13,640 | | | $ | 672,540 | |
Options written | | | 140,801 | | | | 91,206,400 | | | | 515,765 | | | | 30,361,965 | |
Options terminated in closing transactions | | | (98,633 | ) | | | (73,672,065 | ) | | | (484,753 | ) | | | (28,712,655 | ) |
Options exercised | | | (21,422 | ) | | | (11,355,305 | ) | | | (61 | ) | | | (6,080 | ) |
Options expired | | | (20,827 | ) | | | (6,771,103 | ) | | | (32,043 | ) | | | (1,673,005 | ) |
| | | | | | | | |
Outstanding, end of year | | | 1,539 | | | $ | 1,109,698 | | | | 12,548 | | | $ | 642,765 | |
Statement of Assets and Liabilities — Values of Derivatives at October 31, 2016
| | | | | | |
| | | ASSET DERIVATIVES | |
| | | STATEMENT OF ASSETS AND
LIABILITIES LOCATION | | FAIR VALUE | |
Reinsurance Fund | | | | | | |
Futures | | | | | | |
Foreign exchange contracts | | Net assets — Unrealized appreciation* | | $ | 623,983 | |
Interest rate contracts | | Net assets — Unrealized appreciation* | | | 25,733 | |
| | |
High Yield Fund | | | | | | |
Futures | | | | | | |
Foreign exchange contracts | | Net assets — Unrealized appreciation* | | | 36,725 | |
Interest rate contracts | | Net assets — Unrealized appreciation* | | | 22,976 | |
| * | Reflects cumulative unrealized appreciation of futures contracts as reported in the Schedule of Investments. Only the current day’s variation margin is reflected in the Statement of Assets and Liabilities and only in cases where margin is not settled on the same day. |
| | | | | | |
| | | LIABILITY DERIVATIVES | |
| | | STATEMENT OF ASSETS AND
LIABILITIES LOCATION | | FAIR VALUE | |
Reinsurance Fund | | | | | | |
Futures | | | | | | |
Foreign exchange contracts | | Net assets — Unrealized depreciation* | | $ | 44,487 | |
| | |
High Yield Fund | | | | | | |
Futures | | | | | | |
Foreign exchange contracts | | Net assets — Unrealized depreciation* | | | 20,533 | |
| | |
U.S. Large Cap VRP Fund | | | | | | |
Options | | | | | | |
Equity contracts | | Written options, at fair value | | | 1,868,145 | |
| | |
U.S. Small Cap VRP Fund | | | | | | |
Options | | | | | | |
Equity contracts | | Written options, at fair value | | | 759,200 | |
| | |
International Developed Markets VRP Fund | | | | | | |
Options | | | | | | |
Equity contracts | | Written options, at fair value | | | 1,154,029 | |
| | |
Emerging Markets VRP Fund | | | | | | |
Options | | | | | | |
Equity contracts | | Written options, at fair value | | | 652,199 | |
| * | Reflects cumulative unrealized depreciation of futures contracts as reported in the Schedule of Investments. Only the current day’s variation margin is reflected in the Statement of Assets and Liabilities and only in cases where margin is not settled on the same day. |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
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70
| | |
| Notes to Financial Statements | | October 31, 2016 |
The effect of derivative instruments on the Statement of Operations for the year ended October 31, 2016:
| | | | | | | | | | | | |
| AMOUNT OF REALIZED GAIN OR (LOSS) ON DERIVATIVES TRANSACTIONS | |
| | | FUTURES
CONTRACTS | | | WRITTEN
OPTIONS | | | TOTAL | |
Reinsurance Fund | | | | | | | | | | | | |
Foreign exchange contracts | | $ | (460,454 | ) | | $ | | | | $ | (460,454 | ) |
Interest rate contracts | | | (191,116 | ) | | | — | | | | (191,116 | ) |
High Yield Fund | | | | | | | | | | | | |
Foreign exchange contracts | | | (21,645 | ) | | | — | | | | (21,645 | ) |
Interest rate contracts | | | (173,272 | ) | | | — | | | | (173,272 | ) |
U.S. Large Cap VRP Fund | | | | | | | | | | | | |
Equity contracts | | | (971,480 | ) | | | 17,292,983 | | | | 16,321,503 | |
U.S. Small Cap VRP Fund | | | | | | | | | | | | |
Equity contracts | | | 621,427 | | | | 1,743,245 | | | | 2,364,672 | |
International Developed Markets VRP Fund | | | | | | | | | | | | |
Equity contracts | | | 600,202 | | | | 263,232 | | | | 863,434 | |
Emerging Markets VRP Fund | | | | | | | | | | | | |
Equity contracts | | | 219,569 | | | | 1,581,651 | | | | 1,801,220 | |
| | | | | | | | | | | | |
| CHANGE IN UNREALIZED APPRECIATION OR (DEPRECIATION) ON DERIVATIVES TRANSACTIONS | |
| | | FUTURES
CONTRACTS | | | WRITTEN
OPTIONS | | | TOTAL | |
Reinsurance Fund | | | | | | | | | | | | |
Foreign exchange contracts | | $ | 291,962 | | | $ | — | | | $ | 291,962 | |
Interest rate contracts | | | 38,532 | | | | — | | | | 38,532 | |
High Yield Fund | | | | | | | | | | | | |
Foreign exchange contracts | | | 16,192 | | | | — | | | | 16,192 | |
Interest rate contracts | | | 34,612 | | | | — | | | | 34,612 | |
U.S. Large Cap VRP Fund | | | | | | | | | | | | |
Equity contracts | | | — | | | | 782,243 | | | | 782,243 | |
U.S. Small Cap VRP Fund | | | | | | | | | | | | |
Equity contracts | | | — | | | | 540,851 | | | | 540,851 | |
International Developed Markets VRP Fund | | | | | | | | | | | | |
Equity contracts | | | — | | | | (282,028 | ) | | | (282,028 | ) |
Emerging Markets VRP Fund | | | | | | | | | | | | |
Equity contracts | | | — | | | | 76,330 | | | | 76,330 | |
b) Offsetting on the Statement of Assets and Liabilities Accounting Standards Update No. 2011-11 “Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”) intended to help investors and other financial statement users better assess the effect or potential effect of offsetting arrangements on a fund’s financial position. ASU 2011-11 requires entities to disclose both gross and net information about both instruments and transactions eligible for offset on the Statement of Assets and Liabilities, and disclose instruments and transactions subject to master netting or similar agreements. In addition, in January 2013, the FASB issued Accounting Standards Update No. 2013-1 “Clarifying the Scope of Offsetting Assets and Liabilities” (“ASU 2013-1”), specifying exactly which transactions are subject to offsetting disclosures. The scope of the disclosure requirement is limited to derivative instruments, repurchase agreements and reverse repurchase agreements, and securities lending transactions. The International Swap and Derivative Association (“ISDA”) agreements specify collateral posting arrangements. Under the agreements, collateral is routinely transferred if the total net exposure to certain transactions (net of existing collateral already in place) governed under an agreement with a counterparty in a given account exceeds a specified threshold.
As of October 31, 2016, the Funds are not subject to any Master Netting Arrangements.
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| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
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71
| | |
| Notes to Financial Statements | | October 31, 2016 |
(c) Use of Estimates The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
(d) Indemnifications In the normal course of business, the Funds enter into contracts that contain a variety of representations which provide general indemnifications. The Funds’ maximum exposure under these arrangements cannot be known; however, the Funds expect any risk of loss to be remote.
(e) Federal Income Taxes The Funds intend to qualify as “regulated investment companies” under Subchapter M of the Internal Revenue Code of 1986, as amended. If so qualified, the Funds will not be subject to federal income tax to the extent they distribute substantially all of their net investment income and capital gains to shareholders. Therefore, no federal income tax provision is required.
(f) Event-Linked Bonds Event-linked bonds are variable rate debt securities for which the return of principal and payment of interest are contingent on the non-occurrence of a specified trigger event(s) that leads to economic and/or human loss, such as an earthquake of a particular magnitude or a hurricane of a specific category. The most common type of event-linked bonds is known as “catastrophe” or “CAT” bonds. In most cases, the trigger event(s) will not be deemed to have occurred unless the event(s) happened in a particular geographic area and was of a certain magnitude (based on independent scientific readings) and/or caused a certain amount of actual or modeled loss. If the trigger event(s) occurs prior to a bond’s maturity, the Reinsurance Funds may lose all or a portion of its principal and forgo additional interest. In this regard, event-linked bonds typically have a special condition that states that if the sponsor suffers a loss from a particular pre-defined catastrophe or other event that results in physical and/or economic loss, then the issuer’s obligation to pay interest and/or repay the principal is either deferred or completely forgiven. For example, if the Reinsurance Funds hold a bond that covers a sponsor’s losses due to a hurricane with a “trigger” at $1 billion and a hurricane hits causing $1 billion or more in losses to such sponsor, then the Reinsurance Funds will lose all or a portion of their principal invested in the bond and forgo any future interest payments. If the trigger event(s) does not occur, the Reinsurance Funds will recover their principal plus interest. Interest typically accrues and is paid on a quarterly basis. Although principal typically is repaid only on the maturity date, it may be repaid in installments, depending on the terms of the bond, as long as the trigger event(s) does not occur. The Reinsurance Funds may invest in event-linked bonds directly or indirectly through certain derivative instruments. The Reinsurance Funds may pursue other types of event-linked derivative strategies using derivative instruments that are typically contingent, or formulaically related to defined trigger events. Trigger events may include hurricanes, earthquakes and weather-related phenomena, non-natural catastrophes, such as plane crashes, or other events resulting in a specified level of physical or economic loss, such as mortality or longevity.
(g) Quota Share Notes Investments in Quota Share Notes provide exposure to a form of proportional reinsurance in which an investor participates in the premiums and losses of a reinsurer’s portfolio according to a pre-defined percentage. For example, under a 20% quota-share agreement, a special purpose vehicle (“SPV”) would obtain 20% of all premiums of the subject portfolio while being responsible for 20% of all claims, and the Reinsurance Funds, as holders of a Quota Share Note issued by the SPV, would be entitled to their pro rata share of the premiums received by the SPV and would be responsible for their pro rata share of the claims up to the total amount invested.
(h) Excess of Loss Notes Excess of Loss Notes provide exposure to a form of reinsurance pursuant to which one party (typically an insurer or reinsurer) purchases protection against losses that exceed a specified threshold up to a set limit. For example, under such an arrangement, an insurer may have a book of business with $6 billion of total risk in respect of large, catastrophic losses. The insurer can purchase per-occurrence excess-of-loss reinsurance protection from an SPV for 40% of single-event losses the insurer suffers between $4 billion and $5 billion by paying the SPV a fixed premium. In this example, if the insurer suffered a loss of $5 billion due to one event, it would cover the first $4 billion itself (the amount it retained) and file a reinsurance claim with the SPV to pay 40% of the further $1 billion in losses (i.e., $400 million) and pay the remaining $600 million itself. If the insurer had losses of $6 billion, it would cover the first $4 billion itself, look to the SPV to pay 40% of $1 billion (again paying the $600 million itself) and would further retain the obligation to pay the additional $1 billion that exceeds the reinsurance coverage. The “trigger” for this type of reinsurance contract would be losses in excess of the specified amount.
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| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
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| | |
| Notes to Financial Statements | | October 31, 2016 |
(i) ILW Notes ILW Notes provide exposure to a transaction through which one party (typically, an insurance company or reinsurance company, or a reinsurance-related asset manager) purchases protection based on the total loss arising from a catastrophic event to the entire insurance industry rather than the losses of any particular insurer. For example, the buyer of a “$100 million limit U.S. Wind ILW attaching at $20 billion” will pay an upfront premium to a protection writer (i.e., the reinsurer or an SPV) and in return will receive $100 million if total losses to the insurance industry from a single U.S. hurricane exceed $20 billion. The industry loss ($20 billion in this case) is often referred to as the “trigger” and is reported by an independent third party after an event has occurred. The amount of protection offered by the contract ($100 million in this case) is referred to as the “limit.” ILW Notes could also provide exposure to transactions linked to an index not linked to insurance industry losses, such as wind speed or earthquake magnitude and location. The Reinsurance Funds, as holders of an ILW Note, would be entitled to a return linked to the premium paid by the sponsor and the occurrence or non-occurrence of the trigger event.
(j) Distributions to Shareholders The Funds intend to distribute to their shareholders any net investment income and any net realized long- or short-term capital gains, if any, at least annually. Distributions are recorded on ex-dividend date. The Funds each may periodically make reclassifications among certain of their capital accounts as a result of the characterization of certain income and realized gains determined annually in accordance with federal tax regulations that may differ from GAAP.
(k) Foreign Securities and Currency Transactions The Funds’ books and records are maintained in U.S. dollars. Foreign currency denominated transactions (i.e. market value of investment securities, assets and liabilities, purchases and sales of investment securities, and income and expenses) are translated into U.S. dollars at the current rate of exchange. The Funds isolate that portion of results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held and it is reported as realized gains (losses) on foreign currency translation and change in unrealized appreciation (depreciation) on foreign currency related items on the Funds’ statement of operations.
The Reinsurance Funds may invest in reinsurance-related securities issued by foreign sovereigns and foreign entities that are corporations, partnerships, trusts or other types of business entities. Because the majority of reinsurance-related security issuers are domiciled outside the United States, the Reinsurance Funds will normally invest significant amounts of their assets in non-U.S. entities. Accordingly, the Reinsurance Funds may invest without limitation in securities issued by non-U.S. entities, including those in emerging market countries. Certain SPVs in which the Reinsurance Funds invest may be sponsored by non-U.S. insurers that are not subject to the same regulation as that to which U.S. ceding insurers are subject. Such SPVs may pose a greater risk of loss, for example due to less stringent underwriting and/or risk-retention requirements. The Reinsurance Funds’ investments will consist primarily of event-linked bonds, Quota Share Notes, Excess of Loss Notes and ILW Notes that provide the Reinsurance Funds with contractual rights under the terms of the bond issuance. While the contractual rights of such instruments are similar whether they are issued by a U.S. issuer or a non-U.S. issuer, there may be certain additional risks associated with non-U.S. issuers. For example, foreign issuers could be affected by factors not present in the United States, including expropriation, confiscatory taxation, lack of uniform accounting and auditing standards, less publicly available financial and other information, potential difficulties in enforcing contractual obligations, and increased costs to enforce applicable contractual obligations outside the United States, Fluctuations in foreign currency exchange rates and exchange controls may adversely affect the market value of the Reinsurance Funds’ investments in foreign securities. Settlements of securities transactions in foreign countries are subject to risk of loss, may be delayed and are generally less frequent than in the United States, which could affect the liquidity of the Reinsurance Funds’ assets.
The International VRP Funds invest primarily in foreign issued securities. Investments in foreign (non-U.S.) issuers involve risks not ordinarily associated with exposure to securities and instruments of U.S. issuers, including risks relating to political, social and economic developments affecting issuers located in foreign countries and differences between U.S. and foreign regulatory requirements and market practices, including fluctuations in foreign currency exchange rates and regulations, or foreign withholding taxes. Investing directly or indirectly in foreign securities may result in the Fund experiencing more rapid and extreme changes in value than a fund that obtains exposure exclusively in securities of U.S. issuers.
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| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
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| Notes to Financial Statements | | October 31, 2016 |
If the Funds invest in foreign issuers by purchasing American Depositary Receipts (“ADRs”) (U.S. dollar-denominated depositary receipts issued generally by banks and representing the deposit with the bank of a security of a non-U.S. issuer; ADRs are publicly traded on exchanges or over-the counter in the United States), the Funds are exposed to credit risk with respect to the issuer of the ADR, in addition to the risks of the underlying foreign securities.
(l) Allocation of Income, Expenses, Gains/Losses Income, expenses (other than those deemed attributable to a specific share class), and gains and losses of each fund are allocated daily to each share class based upon the ratio of net assets represented by each class as a percentage of the net assets of each fund. Expenses deemed directly attributable to a class of shares are recorded by the specific class. Most expenses are allocated based on average net assets, with the exception of 12b-1 fees, which are expensed at 0.15% of average daily net assets of the Class M shares.
(m) Other Investment transactions are recorded on the trade date. Dividend income, less any foreign tax withheld, is recognized on the ex-dividend date and interest income is recognized on an accrual basis, including amortization/accretion of premiums or discounts. Discounts and premiums on securities purchased are amortized over the lives of the respective securities using the constant yield method.
(n) Restricted Securities The Funds may invest a substantial portion of their assets in securities that are restricted, but eligible for purchase and sale by certain qualified institutional buyers, as defined in Rule 144A under the Securities Act of 1933, as amended, as well as other restricted securities. Restricted securities may be resold in transactions that are exempt from registration under Federal securities laws or if the securities are publically registered. Restricted securities may be deemed illiquid.
(o) REIT Distributions The character of distributions received from real estate investment trusts (“REITs”) held by the Funds is generally comprised of net investment income, capital gains, and return of capital. It is the policy of the Funds to estimate the character of distributions received from underlying REITs based on historical data provided by the REITs. After each calendar year end, REITs report the actual tax character of these distributions. Differences between the estimated and actual amounts reported by the REITs are reflected in the Funds’ records in the year in which they are reported by the REITs by adjusting related investment cost basis, capital gains and income, as necessary.
3. Federal Tax Matters
Provisions for federal income taxes or excise taxes have not been made since the Funds have elected to be taxed as Regulated Investment Companies and intend to distribute substantially all taxable income to shareholders and otherwise comply with the provisions of the Internal Revenue Code applicable to Regulated Investment Companies. Distributions from net realized gains for book purposes may include short-term capital gains which are included as ordinary income to shareholders for tax purposes. Additionally, GAAP requires that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. The reclassifications have no effect on net assets or NAV per share.
For the year ended October 31, 2016, the effect of permanent “book/tax” reclassifications resulted in increases and decreases to components of the Funds’ net assets as follows:
| | | | | | | �� | | | | | |
| | | UNDISTRIBUTED
NET INVESTMENT
INCOME/(LOSS) | | | ACCUMULATED
NET REALIZED
GAIN/(LOSS) | | | PAID IN
CAPITAL | |
Reinsurance Fund | | $ | 9,092,548 | | | $ | (9,092,548 | ) | | $ | — | |
High Yield Fund | | | 2,906,793 | | | | (2,906,794 | ) | | | 1 | |
U.S. Large Cap VRP Fund | | | 6,689,066 | | | | (6,690,829 | ) | | | 1,763 | |
U.S. Small Cap VRP Fund | | | 1,921,811 | | | | (984,955 | ) | | | (936,586 | ) |
U.S. VRP Master Fund | | | 156,605 | | | | (156,605 | ) | | | — | |
International Developed Markets VRP Fund | | | 1,025,941 | | | | 48,505 | | | | (1,074,446 | ) |
Emerging Markets VRP Fund | | | 792,777 | | | | 1 | | | | (792,778 | ) |
International VRP Master Fund | | | (233,728 | ) | | | 289,003 | | | | (55,275 | ) |
Global Equity VRP Master Fund | | | 1,367 | | | | 20,258 | | | | (21,625 | ) |
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| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
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| Notes to Financial Statements | | October 31, 2016 |
These differences primarily relate to foreign currency gains/losses, investments in passive foreign investment companies (“PFICs”), 1256 options contracts, REIT adjustments and net operating losses.
As of October 31, 2016, the components of accumulated earnings (losses) for income tax purposes were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | REINSURANCE
FUND | | | HIGH YIELD
FUND | | | U.S. LARGE
CAP VRP
FUND | | | U.S. SMALL
CAP VRP
FUND | | | U.S. VRP
MASTER
FUND | | | INTERNATIONAL
DEVELOPED
MARKETS VRP
FUND | | | EMERGING
MARKETS
VRP FUND | | | INTERNATIONAL
VRP MASTER
FUND | | | GLOBAL EQUITY
VRP MASTER
FUND | |
Tax cost of investments | | $ | 1,086,028,872 | | | $ | 498,234,072 | | | $ | 382,014,685 | | | $ | 129,055,404 | | | $ | 207,478,112 | | | $ | 97,948,820 | | | $ | 49,454,750 | | | $ | 12,159,583 | | | $ | 41,331,526 | |
Unrealized appreciation | | | 1,201,964 | | | | 66,782 | | | | 481,784 | | | | 547,298 | | | | 7,992,939 | | | | 3,198 | | | | 4,051 | | | | 259,279 | | | | 528,496 | |
Unrealized depreciation | | | 3,119,765 | | | | (371,037 | ) | | | (440,621 | ) | | | (542,124 | ) | | | (1,573,864 | ) | | | (9,820 | ) | | | (1,351 | ) | | | (593,007 | ) | | | (990,206 | ) |
Net unrealized appreciation (depreciation) | | | (1,917,801 | ) | | | (304,255 | ) | | | 41,163 | | | | 5,174 | | | | 6,419,075 | | | | (6,622 | ) | | | 2,700 | | | | (333,728 | ) | | | (461,710 | ) |
Undistributed ordinary income | | | 54,900,483 | | | | 24,860,390 | | | | 221,919 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Undistributed long-term gains/(capital loss carryover) | | | (21,102,332 | ) | | | (8,081,766 | ) | | | 15,909,668 | | | | 2,157,230 | | | | 9,716,614 | | | | 348,134 | | | | (2,761,229 | ) | | | (1,286,999 | ) | | | 1,016,301 | |
Total distributable earnings | | | 54,900,483 | | | | 24,860,390 | | | | 16,131,587 | | | | 2,157,230 | | | | 9,716,614 | | | | 348,134 | | | | — | | | | — | | | | 1,016,301 | |
Other temporary differences | | | 5,492,634 | | | | 3,003,221 | | | | (125,391 | ) | | | (1,412,985 | ) | | | (50,592 | ) | | | (1,394,942 | ) | | | (487,810 | ) | | | (57,690 | ) | | | (93,174 | ) |
Total accumulated earnings (loss) | | $ | 37,372,984 | | | $ | 19,477,590 | | | $ | 16,047,359 | | | $ | 749,419 | | | $ | 16,085,097 | | | $ | (1,053,430 | ) | | $ | (3,246,339 | ) | | $ | (1,678,417 | ) | | $ | 461,417 | |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to mark-to-market adjustments on PFICs, wash sales, and return of capital from underlying investments.
The tax character of distributions paid during the period ended October 31, 2016 was as follows:
| | | | | | | | | | | | | | | | |
| | | ORDINARY
INCOME | | | LONG-TERM
CAPITAL GAIN | | | RETURN OF
CAPITAL | | | TOTAL | |
Reinsurance Fund | | $ | 55,825,591 | | | $ | — | | | $ | — | | | $ | 55,825,591 | |
High Yield Fund | | | 26,525,467 | | | | — | | | | — | | | | 26,525,467 | |
U.S. Large Cap VRP Fund | | | — | | | | 20,542,349 | | | | — | | | | 20,542,349 | |
U.S. Small Cap VRP Fund | | | — | | | | 5,009,156 | | | | — | | | | 5,009,156 | |
U.S. VRP Master Fund | | | — | | | | 2,575,794 | | | | — | | | | 2,575,794 | |
International Developed Markets VRP Fund | | | — | | | | 1,803,640 | | | | — | | | | 1,803,640 | |
Emerging Markets VRP Fund | | | — | | | | — | | | | — | | | | — | |
International VRP Master Fund | | | — | | | | — | | | | — | | | | — | |
Global Equity VRP Master Fund | | | 368,787 | | | | 330,592 | | | | — | | | | 699,379 | |
The fund designated as long-term capital gain dividend, pursuant to Internal Revenue Code Section 852 (b)(3), the amount necessary to reduce the earnings and profits of the fund related to net capital gain to zero for the tax year ended 10/31/2016.
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| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
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| | |
| Notes to Financial Statements | | October 31, 2016 |
The tax character of distributions paid during the period ended October 31, 2015 was as follows:
| | | | | | | | | | | | | | | | |
| | | ORDINARY
INCOME | | | LONG-TERM
CAPITAL GAIN | | | RETURN OF
CAPITAL | | | TOTAL | |
Reinsurance Fund | | $ | 59,717,142 | | | $ | — | | | $ | — | | | $ | 59,717,142 | |
High Yield Fund | | | 29,047,570 | | | | — | | | | — | | | | 29,047,570 | |
U.S. Large Cap VRP Fund | | | 4,016,372 | | | | 5,922,854 | | | | — | | | | 9,939,226 | |
U.S. Small Cap VRP Fund | | | 1,263,965 | | | | 30,192 | | | | — | | | | 1,294,157 | |
U.S. VRP Master Fund | | | 1,958,774 | | | | 5,859,060 | | | | — | | | | 7,817,834 | |
International Developed Markets VRP Fund | | | 858,815 | | | | — | | | | — | | | | 858,815 | |
Emerging Markets VRP Fund | | | — | | | | — | | | | 454,169 | | | | 454,169 | |
International VRP Master Fund | | | 129,251 | | | | 3,352 | | | | 104,975 | | | | 237,578 | |
Global Equity VRP Master Fund | | | 315,599 | | | | — | | | | — | | | | 315,599 | |
At October 31, 2016 certain Funds have tax basis capital losses which may be carried forward indefinitely to offset future capital gains as shown below:
| | | | | | | | | | | | |
| | | SHORT-TERM | | | LONG-TERM | | | TOTAL | |
Reinsurance Fund | | $ | (1,528,587 | ) | | $ | (19,573,745 | ) | | $ | (21,102,332 | ) |
High Yield Fund | | | (510,529 | ) | | | (7,571,237 | ) | | | (8,081,766 | ) |
U.S. Large Cap VRP Fund | | | — | | | | — | | | | — | |
U.S. Small Cap VRP Fund | | | — | | | | — | | | | — | |
U.S. VRP Master Fund | | | — | | | | — | | | | — | |
International Developed Markets VRP Fund | | | — | | | | — | | | | — | |
Emerging Markets VRP Fund | | | (2,761,229 | ) | | | — | | | | (2,761,229 | ) |
International VRP Master Fund | | | — | | | | (1,286,998 | ) | | | (1,286,998 | ) |
Global Equity VRP Master Fund | | | — | | | | — | | | | — | |
To the extent that the Funds listed above may realize future net capital gains, those gains will be offset by any of their unused respective capital loss carryforwards.
At October 31, 2016 certain Funds deferred, on a tax basis, ordinary late-year losses. These losses are deemed to arise on November 1, 2016.
| | | | |
| | | | |
Reinsurance Fund | | $ | — | |
High Yield Fund | | | — | |
U.S. Large Cap VRP Fund | | | — | |
U.S. Small Cap VRP Fund | | | (1,397,509 | ) |
U.S. VRP Master Fund | | | (50,592 | ) |
International Developed Markets VRP Fund | | | (1,378,511 | ) |
Emerging Markets VRP Fund | | | (478,377 | ) |
International VRP Master Fund | | | (57,691 | ) |
Global Equity VRP Master Fund | | | (93,174 | ) |
There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year-ended October 31, 2016, or for any other tax years which are open for examination. As of October 31, 2016 open tax years include the periods ended October 31, 2014, 2015 and 2016. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the year, the Funds did not incur any interest or penalties.
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| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
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| | |
| Notes to Financial Statements | | October 31, 2016 |
4. Agreements
(a) Investment Advisory Agreement Stone Ridge Asset Management LLC (“Stone Ridge” or the “Adviser”) is the Funds’ investment adviser. The Adviser was organized as a Delaware limited liability company in 2012. The Adviser’s primary business is to provide a variety of investment management services, including an investment program for the Funds. The Adviser is responsible for all business activities and oversight of the investment decisions made for the Funds.
As compensation for its services, the Adviser is paid by each of the Reinsurance Funds a fee, computed daily and paid monthly in arrears, at the annual rate of 1.50% of each such Fund’s average daily net assets. As compensation for its services, the Adviser is paid by each of the U.S. VRP Funds and International VRP Funds a fee, computed daily and paid monthly in arrears, at the annual rate of 1.25% of that Fund’s average daily net assets. The U.S. VRP Master Fund, International VRP Master Fund and the Global Equity VRP Master Fund do not pay an advisory fee to the Adviser.
Through February 28, 2017 for the Reinsurance Funds, U.S. VRP Funds, and the International VRP Portfolio of Funds, the Adviser has agreed to waive its management fee and/or pay or otherwise bear operating and other expenses of certain funds or classes thereof (excluding brokerage and transactional expenses, borrowing and other investment-related costs and fees including interest and commitment fees, short dividend expense, acquired fund fees and expenses, taxes, litigation and indemnification expenses, judgments and extraordinary expenses not incurred in the ordinary course of the Funds’ business) solely to the extent necessary to limit the Funds’ total annual fund operating expenses to 2.00% for Class I shares and 2.15% for Class M shares of each of the Reinsurance Funds, 1.75% for the Class I shares and 1.90% for the Class M shares of each of the U.S. VRP Funds and the International Developed Markets VRP Fund, 1.80% for the Class I shares and 1.95% for the Class M shares of the Emerging Markets VRP Fund, and 0.25% for the Class I shares and 0.40% for the Class M shares of the International VRP Master Fund and the Global Equity VRP Master Fund. With respect to each Fund, the Adviser is permitted to recoup in later periods expenses attributable to a Class that the Adviser has paid or otherwise borne (whether through reduction of its management fee or otherwise) to the extent that the expenses for the Class of shares fall below the annual limitation rate in effect at the time of the actual waiver/reimbursement and to the extent that they do not cause the Class to exceed the annual rate in effect at the time of the recoupment; provided, however, that the Adviser shall not be permitted to recoup any such fees or expenses beyond three years from the end of the fiscal year in which the Adviser reduced a fee or reimbursed an expense. As of October 31, 2016, the Adviser has waived and may recoup fees as follows:
| | | | | | | | | | | | |
| FUND | | REMAINING AMOUNT
TO BE RECOUPED
(EXPIRING
OCTOBER 31, 2017) | | | REMAINING AMOUNT
TO BE RECOUPED
(EXPIRING
OCTOBER 31, 2018) | | | REMAINING AMOUNT
TO BE RECOUPED
(EXPIRING
OCTOBER 31, 2019) | |
Reinsurance Fund | | $ | — | | | $ | — | | | $ | — | |
High Yield Fund | | | — | | | | — | | | | — | |
U.S. Large Cap VRP Fund | | | — | | | | — | | | | — | |
U.S. Small Cap VRP Fund | | | — | | | | — | | | | — | |
International Developed Markets VRP Fund | | | — | | | | — | | | | — | |
Emerging Markets VRP Fund | | | (150,014 | ) | | | (147,055 | ) | | | (15,364 | ) |
International VRP Master Fund | | | (104,477 | ) | | | (61,235 | ) | | | (71,499 | ) |
Global Equity VRP Master Fund | | | — | | | | (125,491 | ) | | | (54,253 | ) |
(b) Custodian, Administrator and Transfer Agent The custodian to the Trust is U.S. Bank, N.A. The administrator and transfer agent to the Trust is U.S. Bancorp Fund Services, LLC, an affiliate of U.S. Bank, N.A.
(c) Distributor Quasar Distributors, LLC (the “Distributor”), an affiliate of U.S. Bank, N.A., serves as the Funds’ distributor.
5. Distribution Plan
The Funds pay fees to the Distributor, on an ongoing basis as compensation for the services the Distributor renders and the expenses it bears in connection with the sale and distribution of Class M shares (“distribution fees”) and/or in connection with personal services rendered to Class M shareholders and the maintenance of shareholder accounts
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(“servicing fees”). These payments are made pursuant to a Distribution and Servicing Plan (“12b-1 Plan”) adopted by each Fund pursuant to Rule 12b-1 under the 1940 Act. The maximum annual rate at which the distribution and/or servicing fees may be paid under the 12b-1 Plan is 0.15% of each Fund’s average daily net assets attributable to the Class M Shares. Because 12b-1 fees are paid out of a Fund’s assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than other types of sales charges.
6. Offering Costs
Offering costs include state registration fees and legal fees regarding the preparation of the initial registration statement. Offering costs are accounted for as deferred costs until operations begin and are then amortized to expense over twelve months on a straight-line basis. These offering expenses were advanced by the Adviser, subject to potential recovery (see Note 4). The offering costs incurred by the Global Equity VRP Master Fund were $99,407 and were fully amortized.
7. Related Parties
Certain officers of the Trust are also employees of the Adviser. The Officers, with the exception of a portion of the Chief Compliance Officer’s salary, are not compensated by the Trust.
8. Investment Transactions
For the year ended October 31, 2016, aggregate purchases and sales of securities (excluding short-term securities) by the Funds were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | REINSURANCE
FUND | | | HIGH YIELD
FUND | | | U.S. LARGE
CAP VRP
FUND | | | U.S. SMALL
CAP VRP
FUND | | | U.S. VRP
MASTER
FUND | | | INTERNATIONAL
DEVELOPED
MARKETS VRP
FUND | | | EMERGING
MARKETS
VRP FUND | | | INTERNATIONAL
VRP MASTER
FUND | | | GLOBAL
EQUITY VRP
MASTER
FUND | |
Purchases | | $ | 308,224,729 | | | $ | 101,499,971 | | | $ | 1,443,369 | | | $ | — | | | $ | 54,300,000 | | | $ | 630,471 | | | $ | 815,601 | | | $ | 2,613,591 | | | $ | 8,950,000 | |
Sales | | | 253,254,783 | | | | 100,146,766 | | | | 47,322,743 | | | | 2,902,045 | | | | 34,550,000 | | | | 1,447,054 | | | | 1,501,262 | | | | 19,000,000 | | | | 15,250,000 | |
U.S. Government Security Purchases | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
U.S. Government Security
Sales | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
9. Capital Share Transactions
| | | | | | | | |
| REINSURANCE FUND - CLASS I | | Year Ended
October 31, 2016 | | | Year Ended
October 31, 2015 | |
Shares sold | | | 26,922,012 | | | | 38,011,654 | |
Shares issued to holders in reinvestment of dividends | | | 3,638,572 | | | | 3,544,319 | |
Shares redeemed | | | (26,446,785 | ) | | | (14,877,808 | ) |
Net increase in shares | | | 4,113,799 | | | | 26,678,165 | |
Shares outstanding: | | | | | | | | |
Beginning of year | | | 78,789,436 | | | | 52,111,271 | |
End of year | | | 82,903,235 | | | | 78,789,436 | |
| | | | | | | | |
| REINSURANCE FUND - CLASS M | |
Shares sold | | | 5,080,887 | | | | 10,849,404 | |
Shares issued to holders in reinvestment of dividends | | | 929,768 | | | | 1,473,234 | |
Shares redeemed | | | (7,586,512 | ) | | | (13,637,754 | ) |
Net decrease in shares | | | (1,575,857 | ) | | | (1,315,116 | ) |
Shares outstanding: | | | | | | | | |
Beginning of year | | | 20,383,881 | | | | 21,698,997 | |
End of year | | | 18,808,024 | | | | 20,383,881 | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
78
| | |
| Notes to Financial Statements | | October 31, 2016 |
| | | | | | | | |
| HIGH YIELD FUND - CLASS I | | Year Ended
October 31, 2016 | | | Year Ended
October 31, 2015 | |
Shares sold | | | 7,730,567 | | | | 21,055,054 | |
Shares issued to holders in reinvestment of dividends | | | 2,114,105 | | | | 2,087,474 | |
Shares redeemed | | | (10,510,679 | ) | | | (5,247,057 | ) |
Net increase (decrease) in shares | | | (666,007 | ) | | | 17,895,471 | |
Shares outstanding: | | | | | | | | |
Beginning of year | | | 42,037,555 | | | | 24,142,084 | |
End of year | | | 41,371,548 | | | | 42,037,555 | |
| | | | | | | | |
| HIGH YIELD FUND - CLASS M | | | | | | |
Shares sold | | | 2,086,393 | | | | 1,947,035 | |
Shares issued to holders in reinvestment of dividends | | | 272,346 | | | | 508,817 | |
Shares redeemed | | | (1,982,056 | ) | | | (3,551,850 | ) |
Net increase (decrease) in shares | | | 376,683 | | | | (1,095,998 | ) |
Shares outstanding: | | | | | | | | |
Beginning of year | | | 5,695,629 | | | | 6,791,627 | |
End of year | | | 6,072,312 | | | | 5,695,629 | |
| | | | | | | | |
| U.S. LARGE CAP VRP FUND - CLASS I | | | | | | |
Shares sold | | | 7,900,168 | | | | 8,498,041 | |
Shares issued to holders in reinvestment of dividends | | | 586,798 | | | | 230,243 | |
Shares redeemed | | | (5,268,632 | ) | | | (11,623,906 | ) |
Net increase (decrease) in shares | | | 3,218,334 | | | | (2,895,622 | ) |
Shares outstanding: | | | | | | | | |
Beginning of year | | | 26,211,959 | | | | 29,107,581 | |
End of year | | | 29,430,293 | | | | 26,211,959 | |
| | | | | | | | |
| U.S. LARGE CAP VRP FUND - CLASS M | |
Shares sold | | | 992,059 | | | | 1,146,747 | |
Shares issued to holders in reinvestment of dividends | | | 448,110 | | | | 259,516 | |
Shares redeemed | | | (3,591,462 | ) | | | (3,625,240 | ) |
Net decrease in shares | | | (2,151,293 | ) | | | (2,218,977 | ) |
Shares outstanding: | | | | | | | | |
Beginning of year | | | 8,608,805 | | | | 10,827,782 | |
End of year | | | 6,457,512 | | | | 8,608,805 | |
| | | | | | | | |
| U.S. SMALL CAP VRP FUND - CLASS I | |
Shares sold | | | 3,271,493 | | | | 4,798,685 | |
Shares issued to holders in reinvestment of dividends | | | 147,717 | | | | 32,482 | |
Shares redeemed | | | (2,845,362 | ) | | | (5,536,922 | ) |
Net increase (decrease) in shares | | | 573,848 | | | | (705,755 | ) |
Shares outstanding: | | | | | | | | |
Beginning of year | | | 10,823,869 | | | | 11,529,624 | |
End of year | | | 11,397,717 | | | | 10,823,869 | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
79
| | |
| Notes to Financial Statements | | October 31, 2016 |
| | | | | | | | |
| U.S. SMALL CAP VRP FUND - CLASS M | | Year Ended
October 31, 2016 | | | Year Ended
October 31, 2015 | |
Shares sold | | | 175,450 | | | | 562,120 | |
Shares issued to holders in reinvestment of dividends | | | 58,961 | | | | 12,874 | |
Shares redeemed | | | (541,182 | ) | | | (332,477 | ) |
Net increase (decrease) in shares | | | (306,771 | ) | | | 242,517 | |
Shares outstanding: | | | | | | | | |
Beginning of year | | | 1,633,492 | | | | 1,390,975 | |
End of year | | | 1,326,721 | | | | 1,633,492 | |
| | | | | | | | |
| U.S. VRP MASTER FUND - CLASS I | | | | | | |
Shares sold | | | 5,014,796 | | | | 6,710,245 | |
Shares issued to holders in reinvestment of dividends | | | 89,501 | | | | 196,515 | |
Shares redeemed | | | (1,883,545 | ) | | | (8,971,583 | ) |
Net increase (decrease) in shares | | | 3,220,752 | | | | (2,064,823 | ) |
Shares outstanding: | | | | | | | | |
Beginning of year | | | 13,619,938 | | | | 15,684,761 | |
End of year | | | 16,840,690 | | | | 13,619,938 | |
| | | | | | | | |
| U.S. VRP MASTER FUND - CLASS M | | | | | | |
Shares sold | | | 809,234 | | | | 1,202,672 | |
Shares issued to holders in reinvestment of dividends | | | 51,658 | | | | 238,071 | |
Shares redeemed | | | (2,771,034 | ) | | | (6,766,022 | ) |
Net decrease in shares | | | (1,910,142 | ) | | | (5,325,279 | ) |
Shares outstanding: | | | | | | | | |
Beginning of year | | | 4,964,046 | | | | 10,289,325 | |
End of year | | | 3,053,904 | | | | 4,964,046 | |
| | | | | | | | |
| INTERNATIONAL DEVELOPED MARKETS VRP FUND - CLASS I | | | | |
Shares sold | | | 1,795,333 | | | | 5,358,629 | |
Shares issued to holders in reinvestment of dividends | | | 125,097 | | | | 58,485 | |
Shares redeemed | | | (3,047,388 | ) | | | (2,448,123 | ) |
Net increase (decrease) in shares | | | (1,126,958 | ) | | | 2,968,991 | |
Shares outstanding: | | | | | | | | |
Beginning of year | | | 9,107,360 | | | | 6,138,369 | |
End of year | | | 7,980,402 | | | | 9,107,360 | |
| | | | | | | | |
| INTERNATIONAL DEVELOPED MARKETS VRP FUND - CLASS M | | | | |
Shares sold | | | 447,008 | | | | 330,924 | |
Shares issued to holders in reinvestment of dividends | | | 34,531 | | | | 18,787 | |
Shares redeemed | | | (584,773 | ) | | | (161,065 | ) |
Net increase (decrease) in shares | | | (103,234 | ) | | | 188,646 | |
Shares outstanding: | | | | | | | | |
Beginning of year | | | 2,127,375 | | | | 1,938,729 | |
End of year | | | 2,024,141 | | | | 2,127,375 | |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
80
| | |
| Notes to Financial Statements | | October 31, 2016 |
| | | | | | | | |
| EMERGING MARKETS VRP FUND - CLASS I | | Year Ended
October 31, 2016 | | | Year Ended
October 31, 2015 | |
Shares sold | | | 978,394 | | | | 2,884,018 | |
Shares issued to holders in reinvestment of dividends | | | — | | | | 36,793 | |
Shares redeemed | | | (1,351,568 | ) | | | (1,193,694 | ) |
Net increase (decrease) in shares | | | (373,174 | ) | | | 1,727,117 | |
Shares outstanding: | | | | | | | | |
Beginning of year | | | 5,360,877 | | | | 3,633,760 | |
End of year | | | 4,987,703 | | | | 5,360,877 | |
| | | | | | | | |
| EMERGING MARKETS VRP FUND - CLASS M | | | | | | |
Shares sold | | | 58,818 | | | | 192,090 | |
Shares issued to holders in reinvestment of dividends | | | — | | | | 3,275 | |
Shares redeemed | | | (15,796 | ) | | | (218,445 | ) |
Net increase (decrease) in shares | | | 43,022 | | | | (23,080 | ) |
Shares outstanding: | | | | | | | | |
Beginning of year | | | 349,483 | | | | 372,563 | |
End of year | | | 392,505 | | | | 349,483 | |
| | | | | | | | |
| INTERNATIONAL VRP MASTER FUND - CLASS I | | | | | | |
Shares sold | | | 741,368 | | | | 635,342 | |
Shares issued to holders in reinvestment of dividends | | | — | | | | 5,818 | |
Shares redeemed | | | (953,525 | ) | | | (250,171 | ) |
Net increase (decrease) in shares | | | (212,157 | ) | | | 390,989 | |
Shares outstanding: | | | | | | | | |
Beginning of year | | | 1,002,521 | | | | 611,532 | |
End of year | | | 790,364 | | | | 1,002,521 | |
| | | | | | | | |
| INTERNATIONAL VRP MASTER FUND - CLASS M | | | | |
Shares sold | | | 35,225 | | | | 326,637 | |
Shares issued to holders in reinvestment of dividends | | | — | | | | 14,737 | |
Shares redeemed | | | (1,679,137 | ) | | | (248,131 | ) |
Net increase (decrease) in shares | | | (1,643,912 | ) | | | 93,243 | |
Shares outstanding: | | | | | | | | |
Beginning of year | | | 2,093,659 | | | | 2,000,416 | |
End of year | | | 449,747 | | | | 2,093,659 | |
| | | | | | | | |
| GLOBAL EQUITY VRP MASTER FUND - CLASS I(1) | | | Period Ended
October 31, 2015 | |
Shares sold | | | 745,120 | | | | 7,268,519 | |
Shares issued to holders in reinvestment of dividends | | | 56,080 | | | | 29,508 | |
Shares redeemed | | | (1,326,025 | ) | | | (3,433,820 | ) |
Net increase (decrease) in shares | | | (524,825 | ) | | | 3,864,207 | |
Shares outstanding: | | | | | | | | |
Beginning of period | | | 3,864,207 | | | | — | |
End of period | | | 3,339,382 | | | | 3,864,207 | |
| (1) | Commenced operations on November 14, 2014. |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
81
| | |
| Notes to Financial Statements | | October 31, 2016 |
| | | | | | | | |
| Global Equity VRP Master Fund - Class M(1) | | | | | Period Ended
October 31, 2015 | |
Shares sold | | | 157,902 | | | | 1,075,302 | |
Shares issued to holders in reinvestment of dividends | | | 13,354 | | | | 1,560 | |
Shares redeemed | | | (375,860 | ) | | | (135,787 | ) |
Net increase (decrease) in shares | | | (204,604 | ) | | | 941,075 | |
Shares outstanding: | | | | | | | | |
Beginning of period | | | 941,075 | | | | — | |
End of period | | | 736,471 | | | | 941,075 | |
| (1) | Commenced operations on November 14, 2014. |
10. Transactions with Affiliates
The following issuers are affiliated with the Funds; that is, the Adviser had control of 5% or more of the outstanding voting securities during the year ended October 31, 2016. As defined in Section (2)(a)(3) of the 1940 Act; such issuers are:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | U.S. VRP MASTER FUND | | | | | | INTERNATIONAL VRP MASTER FUND | |
| | | U.S. LARGE
CAP VRP FUND—CLASS I | | | U.S. SMALL
CAP VRP
FUND—CLASS I | | | TOTAL | | | | | | INTERNATIONAL
DEVELOPED
MARKETS VRP
FUND—CLASS I | | | EMERGING
MARKETS VRP
FUND—CLASS I | | | TOTAL | |
| November 1, 2015 Balance | | | | | | | | | | | | | | | | | | | | | | | | | |
Shares | | | 12,131,783 | | | | 6,335,380 | | | | | | | | | | | | 1,964,223 | | | | 1,094,382 | | | | | |
Cost | | $ | 123,295,893 | | | $ | 64,421,375 | | | $ | 187,717,268 | | | | | | | $ | 19,534,671 | | | $ | 10,673,961 | | | $ | 30,208,632 | |
| Additions | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Shares | | | 3,197,600 | | | | 2,253,480 | | | | | | | | | | | | 181,005 | | | | 111,692 | | | | | |
Cost | | $ | 32,400,000 | | | $ | 21,900,000 | | | | | | | | | | | $ | 1,663,591 | | | $ | 950,000 | | | | | |
| Reductions | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Shares | | | 1,819,133 | | | | 1,578,451 | | | | | | | | | | | | 1,338,574 | | | | 771,140 | | | | | |
Cost | | $ | 19,114,959 | | | $ | 16,179,122 | | | | | | | | | | | $ | 13,412,049 | | | $ | 7,715,767 | | | | | |
| October 31, 2016 Balance | | | | | | | | | | | | | | | | | | | | | | | | | |
Shares | | | 13,510,250 | | | | 7,010,409 | | | | | | | | | | | | 806,654 | | | | 434,934 | | | | | |
Cost | | $ | 136,580,934 | | | $ | 70,142,253 | | | $ | 206,723,187 | | | | | | | $ | 7,786,213 | | | $ | 3,908,194 | | | $ | 11,694,407 | |
Value | | $ | 142,938,445 | | | $ | 70,735,027 | | �� | $ | 213,673,472 | | | | | | | $ | 7,808,414 | | | $ | 3,940,499 | | | $ | 11,748,913 | |
| Dividend Income | | $ | — | | | $ | — | | | $ | — | | | | | | | $ | — | | | $ | — | | | $ | — | |
| Realized Gain/(Loss) | | $ | 6,888,871 | (1) | | $ | 2,096,818 | (2) | | $ | 8,985,689 | | | | | | | $ | (748,458 | )(3) | | $ | (1,065,766 | ) | | $ | (1,814,224 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | GLOBAL EQUITY VRP MASTER FUND | |
| | | U.S. LARGE
CAP VRP
FUND—CLASS I | | | U.S. SMALL
CAP VRP
FUND—CLASS I | | | INTERNATIONAL
DEVELOPED
MARKETS VRP
FUND—CLASS I | | | EMERGING
MARKETS VRP
FUND—CLASS I | | | TOTAL | |
| November 1, 2015 Balance | | | | | | | | | | | | | | | | | | | | |
Shares | | | 1,476,076 | | | | 772,609 | | | | 1,611,440 | | | | 894,277 | | | | | |
Cost | | $ | 15,579,655 | | | $ | 7,799,142 | | | $ | 15,742,697 | | | $ | 8,596,431 | | | $ | 47,717,925 | |
| Additions | | | | | | | | | | | | | | | | | | | | |
Shares | | | 253,944 | | | | 148,521 | | | | 271,218 | | | | 280,403 | | | | | |
Cost | | $ | 2,600,000 | | | $ | 1,450,000 | | | $ | 2,500,000 | | | $ | 2,400,000 | | | | | |
| Reductions | | | | | | | | | | | | | | | | | | | | |
Shares | | | 445,665 | | | | 258,740 | | | | 476,887 | | | | 429,531 | | | | | |
Cost | | $ | 4,723,599 | | | $ | 2,637,457 | | | $ | 4,697,077 | | | $ | 4,237,811 | | | | | |
| October 31, 2016 Balance | | | | | | | | | | | | | | | | | | | | |
Shares | | | 1,284,355 | | | | 662,390 | | | | 1,405,771 | | | | 745,149 | | | | | |
Cost | | $ | 13,456,056 | | | $ | 6,611,685 | | | $ | 13,545,620 | | | $ | 6,758,620 | | | $ | 40,371,981 | |
Value | | $ | 13,588,476 | | | $ | 6,683,515 | | | $ | 13,607,866 | | | $ | 6,751,049 | | | $ | 40,630,906 | |
| Dividend Income | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Realized Gain/(Loss) | | $ | 699,928 | (4) | | $ | 218,382 | (5) | | $ | 61,514 | (6) | | $ | (587,811 | ) | | $ | 392,013 | |
| (1) | Includes $7,203,831 of long-term capital gain distributions. |
| (2) | Includes $2,525,940 of long-term capital gain distributions. |
| (3) | Includes $313,591 of long-term capital gain distributions. |
| (4) | Includes $873,527 of long-term capital gain distributions. |
| (5) | Includes $305,839 of long-term capital gain distributions. |
| (6) | Includes $258,591 of long-term capital gain distributions. |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
82
| | |
| Notes to Financial Statements | | October 31, 2016 |
11. Beneficial Ownership
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a fund creates a presumption of control of the fund, under Section 2(a)(9) of the 1940 Act. At October 31, 2016, U.S. VRP Master Fund held, for the benefit of its shareholders, 38% of the U.S. Large Cap VRP Fund and 55% of the U.S. Small Cap VRP Fund. The International VRP Master Fund held, for the benefit of its shareholders, 8% of the International Developed Markets VRP Fund and 8% of the Emerging Markets VRP Fund. The Global Equity VRP Master Fund held, for the benefit of its shareholders, 4% of the U.S. Large Cap VRP Fund, 5% of the U.S. Small Cap VRP Fund, 14% of the International Developed Markets VRP Fund and 14% of the Emerging Markets VRP Fund.
12. Financing Facility
Each of the Reinsurance Funds may obtain leverage through borrowings in seeking to achieve their investment objectives. During the year ended October 31, 2016, the Reinsurance Fund and High Yield Fund established a 29-day rolling financing facility for $50,000,000 and $20,000,000 respectively (the “Facility��). The Facility, when drawn, is secured by each Fund’s assets, particularly catastrophe bonds which are posted as collateral. The Reinsurance Risk Premium Fund’s maximum borrowing was $36,000,000 and average borrowing was $2,936,709. The High Yield Fund’s maximum borrowing was $5,500,000 and average borrowing was $2,093,361. This borrowing resulted in interest expenses of $39,303 at a weighted average interest rate of 2.04% for the Reinsurance Risk Premium Fund and $28,264 at a weighted average interest rate of 2.02% for the High Yield Fund. These amounts are included in Interest Expense on the Statement of Operations. As of October 31, 2016 the outstanding drawn amount for the Reinsurance Fund and High Yield Fund was $36,000,000 and $5,500,000, respectively.
13. Subsequent Events Evaluation
In preparing these financial statements, the Funds have evaluated events and transactions for potential recognition or disclosure resulting from subsequent events through the date the financial statements were available to be issued. Other than the events disclosed below, this evaluation did not result in any subsequent events that necessitated disclosures and/or adjustments.
On September 19, 2016, the Board of Trustees of the Trust approved an Agreement and Plan of Reorganization (the “Plan”) pursuant to which the Reinsurance Fund would be reorganized with and into the High Yield Fund (such transaction being referred to as the “Reorganization”). The closing date of the Reorganization was December 5, 2016. Under the terms of the Plan, shareholders of the Reinsurance Fund received shares of the High Yield Fund equal in U.S. dollar value to the interests of such shareholders in the Reinsurance Fund with each Fund’s shares ordinarily valued as of the close of regular trading on the NYSE on the business day immediately prior to the closing date.
Additionally, on December 1, 2016 as part of the Reorganization, the Reinsurance Fund and High Yield Fund temporarily increased the Facility to $145,000,000 and $55,000,000, respectively. Subsequently, on December 5, 2016 the facility was merged into a single Facility for the High Yield Fund for $200,000,000. On or about April 28, 2017 the Facility will decrease to $100,000,000.
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
83
| | |
| Report of Independent Registered Public Accounting Firm |
The Board of Trustees and Shareholders of Stone Ridge Trust
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Stone Ridge Reinsurance Risk Premium Fund, Stone Ridge High Yield Reinsurance Risk Premium Fund, Stone Ridge U.S. Large Cap Variance Risk Premium Fund, Stone Ridge U.S. Small Cap Variance Risk Premium Fund, Stone Ridge U.S. Variance Risk Premium Master Fund, Stone Ridge International Developed Markets Variance Risk Premium Fund, Stone Ridge Emerging Markets Variance Risk Premium Fund, Stone Ridge International Variance Risk Premium Master Fund, and Stone Ridge Global Equity Variance Risk Premium Master Fund (nine of the portfolios constituting Stone Ridge Trust) (collectively the Funds) as of October 31, 2016, and the related statements of operations for the Funds and the statements of cash flows for the Stone Ridge Reinsurance Risk Premium Fund and the Stone Ridge High Yield Reinsurance Risk Premium Fund for the year then ended, and the statements of changes in net assets, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2016, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the respective Funds constituting Stone Ridge Trust at October 31, 2016, the results of their operations and their cash flows for the year then ended, and the changes in their net assets, and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
New York, NY
December 28, 2016
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
84
| | |
| Expense Examples (Unaudited) |
As a shareholder of the Stone Ridge Funds (each a “Fund”, together the “Funds”), you incur ongoing costs, including investment advisory fees, distribution and/or shareholder servicing fees, and other Fund expenses, which are indirectly paid by shareholders. This example is intended to help you understand your ongoing costs (in U.S. dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held the entire period from May 1, 2016 through October 31, 2016.
Actual Expenses
The first line of each of the tables below provides information about actual account values and actual expenses. However, the table does not include shareholder specific fees, such as the $15.00 fee charged for wire redemptions by the Funds’ transfer agent. The table also does not include portfolio trading commissions and related trading costs. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.
Hypothetical Example For Comparison Purposes
The second line on each table below provides information about hypothetical account values and hypothetical expenses based on the actual expense ratios for each share class of the Funds and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other fund. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relevant total cost of owning different funds.
Stone Ridge Reinsurance Risk Premium Fund — Class I
| | | | | | | | | | | | |
| | | BEGINNING
ACCOUNT
VALUE
MAY 1, 2016 | | | ENDING
ACCOUNT
VALUE
OCTOBER 31, 2016 | | | EXPENSES
PAID DURING
PERIOD*
MAY 1, 2016 –
OCTOBER 31, 2016 | |
Actual | | $ | 1,000.00 | | | $ | 1,040.40 | | | $ | 8.36 | |
Hypothetical (5% annual return before expenses) | | $ | 1,000.00 | | | $ | 1,016.94 | | | $ | 8.26 | |
| * | Expenses are equal to the share class’s annualized six-month expense ratio of 1.63%, multiplied by the average account value over the period, multiplied by 184/366 to reflect the partial year period. |
Stone Ridge Reinsurance Risk Premium Fund — Class M
| | | | | | | | | | | | |
| | | BEGINNING
ACCOUNT
VALUE
MAY 1, 2016 | | | ENDING
ACCOUNT
VALUE
OCTOBER 31, 2016 | | | EXPENSES
PAID DURING
PERIOD*
MAY 1, 2016 –
OCTOBER 31, 2016 | |
Actual | | $ | 1,000.00 | | | $ | 1,040.00 | | | $ | 9.13 | |
Hypothetical (5% annual return before expenses) | | $ | 1,000.00 | | | $ | 1,016.19 | | | $ | 9.02 | |
| * | Expenses are equal to the share class’s annualized six-month expense ratio of 1.78%, multiplied by the average account value over the period, multiplied by 184/366 to reflect the partial year period. |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
85
| | |
| Expense Examples (Unaudited) | | |
Stone Ridge High Yield Reinsurance Risk Premium Fund — Class I
| | | | | | | | | | | | |
| | | BEGINNING
ACCOUNT
VALUE
MAY 1, 2016 | | | ENDING
ACCOUNT
VALUE
OCTOBER 31, 2016 | | | EXPENSES
PAID DURING
PERIOD*
MAY 1, 2016 –
OCTOBER 31, 2016 | |
Actual | | $ | 1,000.00 | | | $ | 1,042.90 | | | $ | 8.58 | |
Hypothetical (5% annual return before expenses) | | $ | 1,000.00 | | | $ | 1,016.74 | | | $ | 8.47 | |
| * | Expenses are equal to the share class’s annualized six-month expense ratio of 1.67%, multiplied by the average account value over the period, multiplied by 184/366 to reflect the partial year period. |
Stone Ridge High Yield Reinsurance Risk Premium Fund — Class M
| | | | | | | | | | | | |
| | | BEGINNING
ACCOUNT
VALUE
MAY 1, 2016 | | | ENDING
ACCOUNT
VALUE
OCTOBER 31, 2016 | | | EXPENSES
PAID DURING
PERIOD*
MAY 1, 2016 –
OCTOBER 31, 2016 | |
Actual | | $ | 1,000.00 | | | $ | 1,041.60 | | | $ | 9.34 | |
Hypothetical (5% annual return before expenses) | | $ | 1,000.00 | | | $ | 1,015.99 | | | $ | 9.22 | |
| * | Expenses are equal to the share class’s annualized six-month expense ratio of 1.82%, multiplied by the average account value over the period, multiplied by 184/366 to reflect the partial year period. |
Stone Ridge U.S. Large Cap Variance Risk Premium Fund — Class I
| | | | | | | | | | | | |
| | | BEGINNING
ACCOUNT
VALUE
MAY 1, 2016 | | | ENDING
ACCOUNT
VALUE
OCTOBER 31, 2016 | | | EXPENSES
PAID DURING
PERIOD*
MAY 1, 2016 –
OCTOBER 31, 2016 | |
Actual | | $ | 1,000.00 | | | $ | 1,033.20 | | | $ | 7.21 | |
Hypothetical (5% annual return before expenses) | | $ | 1,000.00 | | | $ | 1,018.05 | | | $ | 7.15 | |
| * | Expenses are equal to the share class’s annualized six-month expense ratio of 1.41%, multiplied by the average account value over the period, multiplied by 184/366 to reflect the partial year period. |
Stone Ridge U.S. Large Cap Variance Risk Premium Fund — Class M
| | | | | | | | | | | | |
| | | BEGINNING
ACCOUNT
VALUE
MAY 1, 2016 | | | ENDING
ACCOUNT
VALUE
OCTOBER 31, 2016 | | | EXPENSES
PAID DURING
PERIOD*
MAY 1, 2016 –
OCTOBER 31, 2016 | |
Actual | | $ | 1,000.00 | | | $ | 1,033.40 | | | $ | 7.97 | |
Hypothetical (5% annual return before expenses) | | $ | 1,000.00 | | | $ | 1,017.29 | | | $ | 7.91 | |
| * | Expenses are equal to the share class’s annualized six-month expense ratio of 1.56%, multiplied by the average account value over the period, multiplied by 184/366 to reflect the partial year period. |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
86
| | |
| Expense Examples (Unaudited) | | |
Stone Ridge U.S. Small Cap Variance Risk Premium Fund — Class I
| | | | | | | | | | | | |
| | | BEGINNING
ACCOUNT
VALUE
MAY 1, 2016 | | | ENDING
ACCOUNT
VALUE
OCTOBER 31, 2016 | | | EXPENSES
PAID DURING
PERIOD*
MAY 1, 2016 –
OCTOBER 31, 2016 | |
Actual | | $ | 1,000.00 | | | $ | 1,029.60 | | | $ | 7.86 | |
Hypothetical (5% annual return before expenses) | | $ | 1,000.00 | | | $ | 1,017.39 | | | $ | 7.81 | |
| * | Expenses are equal to the share class’s annualized six-month expense ratio of 1.54%, multiplied by the average account value over the period, multiplied by 184/366 to reflect the partial year period. |
Stone Ridge U.S. Small Cap Variance Risk Premium Fund — Class M
| | | | | | | | | | | | |
| | | BEGINNING
ACCOUNT
VALUE
MAY 1, 2016 | | | ENDING
ACCOUNT
VALUE
OCTOBER 31, 2016 | | | EXPENSES
PAID DURING
PERIOD*
MAY 1, 2016 –
OCTOBER 31, 2016 | |
Actual | | $ | 1,000.00 | | | $ | 1,028.70 | | | $ | 8.62 | |
Hypothetical (5% annual return before expenses) | | $ | 1,000.00 | | | $ | 1,016.64 | | | $ | 8.57 | |
| * | Expenses are equal to the share class’s annualized six-month expense ratio of 1.69%, multiplied by the average account value over the period, multiplied by 184/366 to reflect the partial year period. |
Stone Ridge U.S. Variance Risk Premium Master Fund — Class I
| | | | | | | | | | | | |
| | | BEGINNING
ACCOUNT
VALUE
MAY 1, 2016 | | | ENDING
ACCOUNT
VALUE
OCTOBER 31, 2016 | | | EXPENSES
PAID DURING
PERIOD*
MAY 1, 2016 –
OCTOBER 31, 2016 | |
Actual | | $ | 1,000.00 | | | $ | 1,031.70 | | | $ | 0.51 | |
Hypothetical (5% annual return before expenses) | | $ | 1,000.00 | | | $ | 1,024.63 | | | $ | 0.51 | |
| * | Expenses are equal to the share class’s annualized six-month expense ratio of 0.10%, multiplied by the average account value over the period, multiplied by 184/366 to reflect the partial year period. |
Stone Ridge U.S. Variance Risk Premium Master Fund — Class M
| | | | | | | | | | | | |
| | | BEGINNING
ACCOUNT
VALUE
MAY 1, 2016 | | | ENDING
ACCOUNT
VALUE
OCTOBER 31, 2016 | | | EXPENSES
PAID DURING
PERIOD*
MAY 1, 2016 –
OCTOBER 31, 2016 | |
Actual | | $ | 1,000.00 | | | $ | 1,030.80 | | | $ | 1.28 | |
Hypothetical (5% annual return before expenses) | | $ | 1,000.00 | | | $ | 1,023.88 | | | $ | 1.27 | |
| * | Expenses are equal to the share class’s annualized six-month expense ratio of 0.25%, multiplied by the average account value over the period, multiplied by 184/366 to reflect the partial year period. |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
87
| | |
| Expense Examples (Unaudited) | | |
Stone Ridge International Developed Markets Variance Risk Premium Fund — Class I
| | | | | | | | | | | | |
| | | BEGINNING
ACCOUNT
VALUE
MAY 1, 2016 | | | ENDING
ACCOUNT
VALUE
OCTOBER 31, 2016 | | | EXPENSES
PAID DURING
PERIOD*
MAY 1, 2016 –
OCTOBER 31, 2016 | |
Actual | | $ | 1,000.00 | | | $ | 1,053.30 | | | $ | 9.24 | |
Hypothetical (5% annual return before expenses) | | $ | 1,000.00 | | | $ | 1,016.14 | | | $ | 9.07 | |
| * | Expenses are equal to the share class’s annualized six-month expense ratio of 1.79%, multiplied by the average account value over the period, multiplied by 184/366 to reflect the partial year period. |
Stone Ridge International Developed Markets Variance Risk Premium Fund — Class M
| | | | | | | | | | | | |
| | | BEGINNING
ACCOUNT
VALUE
MAY 1, 2016 | | | ENDING
ACCOUNT
VALUE
OCTOBER 31, 2016 | | | EXPENSES
PAID DURING
PERIOD*
MAY 1, 2016 –
OCTOBER 31, 2016 | |
Actual | | $ | 1,000.00 | | | $ | 1,053.50 | | | $ | 10.01 | |
Hypothetical (5% annual return before expenses) | | $ | 1,000.00 | | | $ | 1,015.38 | | | $ | 9.83 | |
| * | Expenses are equal to the share class’s annualized six-month expense ratio of 1.94%, multiplied by the average account value over the period, multiplied by 184/366 to reflect the partial year period. |
Stone Ridge Emerging Markets Variance Risk Premium Fund — Class I
| | | | | | | | | | | | |
| | | BEGINNING
ACCOUNT
VALUE
MAY 1, 2016 | | | ENDING
ACCOUNT
VALUE
OCTOBER 31, 2016 | | | EXPENSES
PAID DURING
PERIOD*
MAY 1, 2016 –
OCTOBER 31, 2016 | |
Actual | | $ | 1,000.00 | | | $ | 1,034.20 | | | $ | 9.20 | |
Hypothetical (5% annual return before expenses) | | $ | 1,000.00 | | | $ | 1,016.09 | | | $ | 9.12 | |
| * | Expenses are equal to the share class’s annualized six-month expense ratio of 1.80%, multiplied by the average account value over the period, multiplied by 184/366 to reflect the partial year period. |
Stone Ridge Emerging Markets Variance Risk Premium Fund — Class M
| | | | | | | | | | | | |
| | | BEGINNING
ACCOUNT
VALUE
MAY 1, 2016 | | | ENDING
ACCOUNT
VALUE
OCTOBER 31, 2016 | | | EXPENSES
PAID DURING
PERIOD*
MAY 1, 2016 –
OCTOBER 31, 2016 | |
Actual | | $ | 1,000.00 | | | $ | 1,033.20 | | | $ | 9.97 | |
Hypothetical (5% annual return before expenses) | | $ | 1,000.00 | | | $ | 1,015.33 | | | $ | 9.88 | |
| * | Expenses are equal to the share class’s annualized six-month expense ratio of 1.95%, multiplied by the average account value over the period, multiplied by 184/366 to reflect the partial year period. |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
88
| | |
| Expense Examples (Unaudited) | | |
Stone Ridge International Variance Risk Premium Master Fund — Class I
| | | | | | | | | | | | |
| | | BEGINNING
ACCOUNT
VALUE
MAY 1, 2016 | | | ENDING
ACCOUNT
VALUE
OCTOBER 31, 2016 | | | EXPENSES
PAID DURING
PERIOD*
MAY 1, 2016 –
OCTOBER 31, 2016 | |
Actual | | $ | 1,000.00 | | | $ | 1,045.10 | | | $ | 1.29 | |
Hypothetical (5% annual return before expenses) | | $ | 1,000.00 | | | $ | 1,023.88 | | | $ | 1.27 | |
| * | Expenses are equal to the share class’s annualized six-month expense ratio of 0.25%, multiplied by the average account value over the period, multiplied by 184/366 to reflect the partial year period. |
Stone Ridge International Variance Risk Premium Master Fund — Class M
| | | | | | | | | | | | |
| | | BEGINNING
ACCOUNT
VALUE
MAY 1, 2016 | | | ENDING
ACCOUNT
VALUE
OCTOBER 31, 2016 | | | EXPENSES
PAID DURING
PERIOD*
MAY 1, 2016 –
OCTOBER 31, 2016 | |
Actual | | $ | 1,000.00 | | | $ | 1,045.20 | | | $ | 2.06 | |
Hypothetical (5% annual return before expenses) | | $ | 1,000.00 | | | $ | 1,023.13 | | | $ | 2.03 | |
| * | Expenses are equal to the share class’s annualized six-month expense ratio of 0.40%, multiplied by the average account value over the period, multiplied by 184/366 to reflect the partial year period. |
Stone Ridge Global Equity Variance Risk Premium Master Fund — Class I
| | | | | | | | | | | | |
| | | BEGINNING
ACCOUNT
VALUE
MAY 1, 2016 | | | ENDING
ACCOUNT
VALUE
OCTOBER 31, 2016 | | | EXPENSES
PAID DURING
PERIOD*
MAY 1, 2016 –
OCTOBER 31, 2016 | |
Actual | | $ | 1,000.00 | | | $ | 1,039.10 | | | $ | 1.28 | |
Hypothetical (5% annual return before expenses) | | $ | 1,000.00 | | | $ | 1,023.88 | | | $ | 1.27 | |
| * | Expenses are equal to the share class’s annualized six-month expense ratio of 0.25%, multiplied by the average account value over the period, multiplied by 184/366 to reflect the partial year period. |
Stone Ridge Global Equity Variance Risk Premium Master Fund — Class M
| | | | | | | | | | | | |
| | | BEGINNING
ACCOUNT
VALUE
MAY 1, 2016 | | | ENDING
ACCOUNT
VALUE
OCTOBER 31, 2016 | | | EXPENSES
PAID DURING
PERIOD*
MAY 1, 2016 –
OCTOBER 31, 2016 | |
Actual | | $ | 1,000.00 | | | $ | 1,037.00 | | | $ | 2.05 | |
Hypothetical (5% annual return before expenses) | | $ | 1,000.00 | | | $ | 1,023.13 | | | $ | 2.03 | |
| * | Expenses are equal to the share class’s annualized six-month expense ratio of 0.40%, multiplied by the average account value over the period, multiplied by 184/366 to reflect the partial year period. |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
89
| | |
| Additional Information (Unaudited) |
1. Board Approval of the Continuation of Certain Investment Management Agreements
Throughout the year, the Board of Trustees (the “Board”) of Stone Ridge Trust (the “Trust”), including the members of the Board who are not “interested persons” of the Trust (as that term is defined in the Investment Company Act of 1940, as amended) (the “Independent Trustees”), considers matters bearing on the investment management agreements between Stone Ridge Asset Management LLC (the “Adviser”) and the Trust, on behalf of each series of the Trust. On an annual basis, the Board, including the Independent Trustees, holds an in-person meeting to determine whether to approve the continuation, ordinarily for an additional one-year period, of any investment management agreements that are proposed to be renewed.
At an in-person meeting held on September 19, 2016, the Board, including a majority of the Independent Trustees, considered and approved the continuation for a one-year period of each of the investment management agreements (the “Existing Agreements”) between the Adviser and the Trust on behalf of Stone Ridge Reinsurance Risk Premium Fund (the “Reinsurance Risk Premium Fund”) and Stone Ridge High Yield Reinsurance Risk Premium Fund (the “High Yield Reinsurance Risk Premium Fund” and, together with the Reinsurance Risk Premium Fund the “Reinsurance Funds”), Stone Ridge U.S. Small Cap Variance Risk Premium Fund (the “U.S. Small Cap VRP Fund”), Stone Ridge U.S. Large Cap Variance Risk Premium Fund (the “U.S. Large Cap VRP Fund”), and Stone Ridge U.S. Variance Risk Premium Master Fund (the “U.S. VRP Master Fund” and, collectively with the U.S. Small Cap VRP Fund and the U.S. Large Cap VRP Fund, the “U.S. VRP Funds”), Stone Ridge International Developed Markets Variance Risk Premium Fund, Stone Ridge Emerging Markets Variance Risk Premium Fund, Stone Ridge International Variance Risk Premium Master Fund, and Stone Ridge Global Equity Variance Risk Premium Master Fund (together, the “International VRP Funds”). In evaluating each Existing Agreement, the Board considered information and materials furnished by the Adviser in advance of and at the meeting and was afforded the opportunity to request additional information and to ask questions of the Adviser to obtain information that it believed to be reasonably necessary to evaluate the terms of the Existing Agreements. In addition, as part of this process, the Independent Trustees had the opportunity to meet in executive session with legal counsel to the Trust without representatives of the Adviser present. The Board noted that the U.S. VRP Master Fund pursues its investment objective and principal investment strategies by investing in a combination of the U.S. Large Cap VRP Fund and the U.S. Small Cap VRP Fund (the “Underlying U.S. VRP Funds”), the International Variance Risk Premium Master Fund (the “International VRP Master Fund”) pursues its investment objective and principal investment strategies by investing in a combination of the Stone Ridge International Developed Markets Variance Risk Premium Fund and the Stone Ridge Emerging Markets Variance Risk Premium Fund (the “Underlying International VRP Funds”), and the Global Equity Variance Risk Premium Master Fund (the “Global Equity VRP Master Fund”) pursues its investment objective and principal investment strategies by investing in a combination of the Underlying U.S. VRP Funds and the Underlying International VRP Funds (the Underlying International VRP Funds together with the Underlying U.S. VRP Funds, the “Underlying Funds”). As a result, some of the information the Board took into consideration as part of its review of the Existing Agreements for the U.S. VRP Master Fund, the International VRP Master Fund and the Global Equity VRP Master Fund (collectively, the “VRP Master Funds”) related to the Underlying Funds.
The Board’s consideration of each Existing Agreement included but was not limited to: (1) the nature, extent, and quality of the services provided by the Adviser; (2) the investment performance of the Funds and the Adviser; (3) the cost of the services provided and the profits and other benefits realized by the Adviser from its relationship with each Fund; and (4) the extent to which economies of scale may be realized as the Funds grow and whether fee levels reflect such economies of scale for the benefit of shareholders of the Funds. In determining whether to approve the continuation of the Existing Agreements, the Board, including the Independent Trustees, did not identify any single factor as determinative; individual trustees may have evaluated the information presented differently from one another, giving different weights to various factors.
In considering the nature, extent, and quality of the services provided by the Adviser, the Board considered the investment management services provided by the Adviser, including management of each Fund’s portfolio in accordance with its investment objective, investment policies, investment restrictions and applicable law; the unique nature of the Funds’ investment programs in the registered fund space; investment selection and monitoring; selection of trading counterparties and order management; the creation and implementation of ongoing analytical and risk management strategies; the Adviser’s investment in infrastructure, technology, and personnel needed to implement each Fund’s investment program; and the oversight and/or implementation of policies and procedures necessary to fulfill these responsibilities. For each of the U.S. VRP Master Fund, the International VRP Master Fund and the Global Equity
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
90
| | |
| Additional Information (Unaudited) | | |
VRP Master Fund, the Board considered the Adviser’s responsibilities in selecting and weighting such Funds’ investments in the appropriate Underlying Funds and the ongoing monitoring of such selection. The Board also considered other services provided by the Adviser, including proxy voting (to the extent applicable), monitoring potential conflicts of interest and maintaining regulatory compliance programs for the Funds. In addition, the Board considered the qualifications and professional backgrounds of the Adviser’s personnel who provide significant advisory or other services to each Fund under the applicable Existing Agreement and analyzed the Adviser’s ongoing ability to service the Funds through such personnel. Based on this and related information, the Board, including the Independent Trustees, concluded that the nature, extent and quality of services supported the continuation of the Existing Agreements.
In considering the investment performance of the Funds and the Adviser, the Board reviewed information provided by the Adviser relating to each Fund’s performance together with the performance of each Fund’s corresponding index or indexes (where applicable). For the Reinsurance Funds, the Board considered the performance information for the 1 month, 3 month, 6 month, 1 year and 3 year periods ended July 31, 2016 as well as for the period since each Fund’s inception on February 1, 2013. For the U.S. VRP Funds (except the U.S. VRP Master Fund) the Board considered the performance information for the 1 month, 3 month, 6 month, 1 year and 3 year periods ended July 31, 2016 as well as for the period since each Fund’s inception on May 1, 2013. For the International VRP Funds, the Board considered the performance information for the 1 month, 3 month, 6 month and 1 year periods ended July 31, 2016 as well as for the period since each Fund’s inception on February 11, 2014. For the U.S. VRP Master Fund and the Global Equity VRP Master Fund, the Board considered the performance information for the 1 month, 3 month, 6 month and 1 year periods ended July 31, 2016 as well as for the period since each Fund’s inception: May 22, 2013 (for the U.S. VRP Master Fund) and November 14, 2014 (for the Global Equity VRP Master Fund). The Board also reviewed performance information for funds within Morningstar categories that include multialternative and managed futures (for the U.S. VRP Funds, except the U.S. VRP Master Fund), Alternative Investment Focus funds that invest greater than 15% their assets in foreign securities (for the International VRP Funds, except the International VRP Master Fund), non-traditional bond funds (for the Reinsurance Funds) and alternative strategies funds, limited to funds-of-funds that invest in affiliated underlying funds (for the VRP Master Funds), in each case, within a specified size range relative to the Funds, as determined by the Adviser (the “peer groups”). The Board considered the performance information for any comparable registered investment funds managed by the Adviser. The Board also considered the Adviser’s explanation that there are very few, if any, funds that follow investment strategies similar to those of the Funds due to the unique nature of the Funds’ investment strategies among registered funds, thus making it difficult to identify appropriate peer groups for the Funds and that the peer groups identified were based on an assessment of how the Adviser and the Funds’ third-party administrator believed Morningstar would likely categorize the Funds. The Board, including the Independent Trustees, concluded that each Fund’s performance and/or other relevant factors supported the renewal of the Existing Agreement relating to that Fund.
In considering the cost of services provided and the benefits realized by the Adviser from its relationship with each Fund, the Board considered the fees paid under each Existing Agreement, the expense ratio for each Fund and any contractual expense limitation undertaken by the Adviser. The Board took into consideration that the VRP Master Funds are not charged an advisory fee under the applicable Existing Agreement. They noted that, because each of the VRP Master Funds invests in the applicable Underlying Funds, each of which pays the Adviser a management fee, the Adviser receives additional fees from the Underlying Funds as a result of each VRP Master Fund’s investments in the applicable Underlying Funds. In considering the appropriateness of the advisory fees, expense ratios and expense limitations applicable to the Funds, the Board also compared this data against the corresponding information for the funds in the peer group. The Board took into consideration information provided by the Adviser relating to the Adviser’s financial health, profitability and the benefits that the Adviser derives from the Existing Agreements. The Board also noted that the Adviser may receive reputational benefits from its relationships with the Funds. Based on the foregoing information and other factors deemed relevant, the Board, including the Independent Trustees, concluded that the advisory fee arrangements applicable to each of the Funds pursuant to the Existing Agreements were fair and reasonable and that the costs of the services the Adviser provided and the related benefits to the Adviser in respect of its relationships with the Funds supported the continuation of the Existing Agreements.
Finally, the Board considered the extent to which economies of scale in the provision of services by the Adviser would be realized as the Funds grow and whether the Funds’ fee levels reflect such economies of scale, such as through breakpoints in their investment advisory fees or through expense waiver or limitation agreements. The Board noted the
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
91
| | |
| Additional Information (Unaudited) | | |
Adviser’s views regarding its ability to achieve economies of scale in respect of the different asset classes represented by the Funds’ investment programs. In addition, the Trustees noted that each of the Funds, other than the U.S. VRP Master Fund, was subject to a contractual expense limitation agreement. The Board noted that the Adviser generally sets the expense limitations for the Funds, if any, at levels that it believes reflect market levels for the services provided to, and expenses borne by, the Funds. After reviewing this and related information, the Board, including the Independent Trustees, concluded that the extent to which economies of scale currently are shared with the Funds supported the continuation of the Existing Agreements.
Based on a consideration and evaluation of all factors deemed to be relevant, including the foregoing matters and the Board’s determination that the continuation of each of the Existing Agreements was in the best interests of the shareholders, the Board, including the Independent Trustees, concluded that each of the Existing Agreements should be continued for a one-year period.
2. Disclosure Regarding Fund Trustees and Officers
| | | | | | | | | | |
| Independent Trustees(1) |
NAME
(YEAR OF BIRTH) AND ADDRESS(2) | | POSITION(S)
HELD WITH
THE TRUST | | TERM OF
OFFICE AND
LENGTH OF
TIME SERVED(3) | | PRINCIPAL OCCUPATION(S)
DURING THE PAST 5 YEARS | | NUMBER OF
PORTFOLIOS
IN THE FUND
COMPLEX
OVERSEEN BY
TRUSTEE(4) | | OTHER
DIRECTORSHIPS /
TRUSTEESHIPS
HELD BY TRUSTEE
DURING THE
PAST 5 YEARS |
Jeffery Ekberg (1965) | | Trustee | | since 2013 | | Principal, TPG Capital, L.P (private equity firm)., until 2011; Chief Financial Officer, Newbridge Capital, LLC (private equity firm), until 2011 | | 13 | | TPG Capital, LLC and
affiliates (sponsored
investment funds),
until 2011. |
| | | | | |
Daniel Charney (1970) | | Trustee | | since 2013 | | Cowen Group (financial services firm), since 2012; Jefferies & Co. (investment bank), until 2011 | | 13 | | None. |
| | | | | | | | | | |
| Interested Trustee |
NAME
(YEAR OF BIRTH) AND ADDRESS(2) | | POSITION(S)
HELD WITH
THE TRUST | | TERM OF
OFFICE AND
LENGTH OF
TIME SERVED(3) | | PRINCIPAL OCCUPATION(S)
DURING THE PAST 5 YEARS | | NUMBER OF
PORTFOLIOS
IN THE FUND
COMPLEX
OVERSEEN BY
TRUSTEE(4) | | OTHER
DIRECTORSHIPS /
TRUSTEESHIPS
HELD BY TRUSTEE
DURING THE
PAST 5 YEARS |
Ross Stevens(5) (1969) | | Trustee, Chairman | | since 2013 | | Founder of Stone Ridge Asset Management LLC, Chief Executive Officer and President of the Adviser, since 2012, Magnetar Capital (investment advisory firm) (Investment Committee and Co-Head of Portfolio Managers Committee), until 2012 | | 13 | | None. |
| (1) | Trustees who are not “interested persons” of the Trust as defined in the 1940 Act. |
| (2) | Each Trustee’s mailing address is c/o Stone Ridge Asset Management LLC, 510 Madison Avenue, 21st Floor, New York, NY 10022. |
| (3) | Each Trustee serves until resignation or removal from the Board. |
| (4) | Fund complex includes Stone Ridge Trust II, Stone Ridge Trust III, Stone Ridge Trust IV and Stone Ridge Trust V, other investment companies managed by the Adviser. |
| (5) | Mr. Stevens is an “interested person” of the Trust, as defined in Section 2(a)(19) of the 1940 Act, due to his position with the Adviser. |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
92
| | |
| Additional Information (Unaudited) | | |
The Statement of Additional Information includes additional information about the Fund’s Trustees and is available free of charge upon request by call the Funds toll free at 1.855.609.3680
| | | | | | |
| Officers of the Trust |
NAME (YEAR OF
BIRTH) AND ADDRESS(1) | | POSITION(S)
HELD
WITH THE TRUST | | TERM OF
OFFICE AND
LENGTH OF
TIME SERVED(2) | | PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS |
Ross Stevens (1969) | | President and Chief Executive Officer | | since 2013 | | Founder of Stone Ridge Asset Management LLC, Chief Executive Officer and President of the Adviser, since 2012; prior to that Magnetar Capital (investment advisory firm) (Investment Committee and Co-Head of Portfolio Managers Committee). |
| | | |
Lauren D. Macioce (1978) | | Chief Compliance Officer and Secretary(3) | | since 2016 | | General Counsel and Chief Compliance Officer of the Adviser, since 2016(3); prior to that Associate at Ropes & Gray LLP (law firm). |
| | | |
Patrick Kelly (1978) | | Treasurer and Principal Financial Officer | | since 2013 | | Chief Operating Officer of the Adviser, since 2012; prior to that Chief Operating Officer of Quantitative Strategies at Magnetar Capital (investment advisory firm). |
| (1) | Each Officer’s mailing address is c/o Stone Ridge Asset Management LLC, 510 Madison Avenue, 21st Floor, New York, NY 10022. |
| (2) | The term of office of each officer is indefinite. |
| (3) | Effective February 29, 2016. |
3. Shareholder Notification of Federal Tax Status
For the fiscal year ended October 31, 2016, certain dividends paid by the Funds may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The percentage of dividends declared from ordinary income designated as qualified dividend income was as follows:
| | | | |
| | | PERCENTAGES |
Reinsurance Fund | | | 0.00 | % |
High Yield Fund | | | 0.00 | % |
U.S. Large Cap VRP Fund | | | 0.00 | % |
U.S. Small Cap VRP Fund | | | 0.00 | % |
U.S. VRP Master Fund | | | 0.00 | % |
International Developed Markets VRP Fund | | | 0.00 | % |
Emerging Markets VRP Fund | | | 0.00 | % |
International VRP Master Fund | | | 0.00 | % |
Global Equity VRP Master Fund | | | 4.13 | % |
For corporate shareholders, the percent of ordinary income distributions qualifying for the corporate dividends received deduction for the fiscal period ended October 31, 2016 was as follows:
| | | | |
| | | PERCENTAGES |
Reinsurance Fund | | | 0.00 | % |
High Yield Fund | | | 0.00 | % |
U.S. Large Cap VRP Fund | | | 0.00 | % |
U.S. Small Cap VRP Fund | | | 0.00 | % |
U.S. VRP Master Fund | | | 0.00 | % |
International Developed Markets VRP Fund | | | 0.00 | % |
Emerging Markets VRP Fund | | | 0.00 | % |
International VRP Master Fund | | | 0.00 | % |
Global Equity VRP Master Fund | | | 3.57 | % |
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
93
| | |
| Additional Information (Unaudited) | | |
The percentage of taxable ordinary income distributions that are designated as interest related dividends under Internal Revenue Section 871(k)(1)(c) for each Fund were as follows:
| | | | |
| | | PERCENTAGES |
Reinsurance Fund | | | 0.00 | % |
High Yield Fund | | | 0.00 | % |
U.S. Large Cap VRP Fund | | | 0.00 | % |
U.S. Small Cap VRP Fund | | | 0.00 | % |
U.S. VRP Master Fund | | | 0.00 | % |
International Developed Markets VRP Fund | | | 0.00 | % |
Emerging Markets VRP Fund | | | 0.00 | % |
International VRP Master Fund | | | 0.00 | % |
Global Equity VRP Master Fund | | | 0.00 | % |
The percentage of taxable ordinary income distributions that are designated as short-term capital gain distributions under Internal Revenue Section 871(k)(2)(c) for each Fund were as follows:
| | | | |
| | | PERCENTAGES |
Reinsurance Fund | | | 0.00 | % |
High Yield Fund | | | 0.00 | % |
U.S. Large Cap VRP Fund | | | 0.00 | % |
U.S. Small Cap VRP Fund | | | 0.00 | % |
U.S. VRP Master Fund | | | 0.00 | % |
International Developed Markets VRP Fund | | | 0.00 | % |
Emerging Markets VRP Fund | | | 0.00 | % |
International VRP Master Fund | | | 0.00 | % |
Global Equity VRP Master Fund | | | 52.73 | % |
Shareholders should not use the above information to prepare their tax returns. Since each Fund’s fiscal year is not the calendar year, another notification will be made available with respect to calendar year 2016. Such notification, which will reflect the amount to be used by calendar year taxpayers on their Federal income tax returns, will be made in conjunction with Form 1099-DIV and will be made available in February on the Funds’ website, www.stoneridgefunds.com. Shareholders are advised to consult their own tax advisors with respect to the tax consequences of their investment in each of the Funds.
4. Availability of Quarterly Portfolio Holdings Schedules
The Funds are required to file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Form N-Q is available without charge on the SEC’s website (http://www.sec.gov) and may be available by calling 1.855.609.3680. You may also obtain copies at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1.800.SEC.0330.
5. Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge by calling 1.855.609.3680 and on the SEC’s website (http://www.sec.gov). The Funds are required to file how they voted proxies related to portfolio securities during the most recent 12-month period ended June 30. The information is available without charge, upon request by calling 1.855.609.3680 and on the SEC’s website (http://www.sec.gov).
| | | | | | | | | | | | | | | | |
| | Stone Ridge Funds | | | | | | Annual Report | | | | | | October 31, 2016 | | |
| | | | | | | | | | |
94
Investment Adviser
Stone Ridge Asset Management LLC
510 Madison Avenue, 21st Floor
New York, NY 10022
Independent Registered Public Accounting Firm
Ernst & Young LLP
5 Times Square
New York, NY 10036
Legal Counsel
Ropes & Gray LLP
Prudential Tower
800 Boylston Street
Boston, MA 02199
Custodian
U.S. Bank, N.A.
1555 North RiverCenter Drive, Suite 302
Milwaukee, WI 53212
Distributor
Quasar Distributors, LLC
615 East Michigan Street
Milwaukee, WI 53202
Administrator, Transfer Agent and Dividend Disbursing Agent
U.S. Bancorp Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
SQANNU
Item 2. Code of Ethics.
The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer and principal financial officer. The registrant has not made any substantive amendments to its code of ethics during the period covered by this report. The registrant has not granted any waivers from any provisions of the code of ethics during the period covered by this report.
A copy of the registrant’s Code of Ethics is filed herewith.
Item 3. Audit Committee Financial Expert.
The registrant’s board of trustees has determined that there is at least one audit committee financial expert serving on its audit committee. Jeffery Ekberg is the “audit committee financial expert” and is considered to be “independent” as each term is defined in Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
The registrant has engaged its principal accountant to perform audit services, audit-related services, tax services and other services during the past two fiscal years. “Audit services” refer to performing an audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. “Audit-related services” refer to the assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s annual financial statements and are not included as “audit services”. “Tax services” refer to professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning including review of the funds’ tax returns, asset diversification and income testing, excise taxes, and fiscal year end income calculations. “All other fees” refer to the aggregate fees for products and series provide by the principal accountant, other than the services reported in the foregoing three categories. The following table details the aggregate fees billed or expected to be billed for each of the last two fiscal years for audit fees, audit-related fees, tax fees and other fees by the principal accountant.
| | | | |
| | | FYE 10/31/2016 | | FYE 10/31/2015 |
Audit Fees | | $424,250 | | $422,681 |
Audit-Related Fees | | $0 | | $0 |
Tax Fees | | $159,500 | | $159,500 |
All Other Fees | | $0 | | $0 |
The audit committee has adopted pre-approval policies and procedures that require the audit committee to pre-approve all audit and non-audit services of the registrant, including services provided to any entity affiliated with the registrant.
The percentage of fees billed by Ernst & Young, LLP applicable to non-audit services pursuant to waiver of pre-approval requirement were as follows:
| | | | |
| | | FYE 10/31/2016 | | FYE 10/31/2015 |
Audit-Related Fees | | 0% | | 0% |
Tax Fees | | 0% | | 0% |
All Other Fees | | 0% | | 0% |
1
All of the principal accountant’s hours spent on auditing the registrant’s financial statements were attributed to work performed by full-time permanent employees of the principal accountant.
The following table indicates the non-audit fees billed or expected to be billed by the registrant’s accountant for services to the registrant and to the registrant’s investment adviser and any entity controlling, controlled by, or under common control with the registrant’s investment adviser that provides ongoing services to the registrant for the last two fiscal years of the registrant. The audit committee of the board of trustees has considered whether the provision of any non-audit services that were rendered to the registrant’s investment adviser and any entity controlling, controlled by, or under common control with the registrant’s investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence and has concluded that the provision of any such non-audit services by the accountant has not compromised the accountant’s independence.
| | | | |
| Non-Audit Related Fees | | FYE 10/31/2016 | | FYE 10/31/2015 |
Registrant | | $159,500 | | $159,500 |
| Registrant’s Investment Adviser | | $96,392 | | $42,000 |
Item 5. Audit Committee of Listed Registrants.
Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934).
Item 6. Investments.
(a) Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.
(b) Not Applicable
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
Not Applicable
2
Item 11. Controls and Procedures.
| (a) | The registrant’s President and Treasurer have reviewed the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the registrant and by the registrant’s service provider. |
| (b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. Exhibits.
| (a) | (1) Any code of ethics or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Filed herewith |
(2) A separate certification for each principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable.
| (b) | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith. |
3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | |
| (Registrant) Stone Ridge Trust | | |
|
| By (Signature and Title)* /s/ Ross Stevens |
| | Ross Stevens, President | | |
|
| Date 2/6/2017 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | | | |
|
| By (Signature and Title)* /s/ Ross Stevens |
| | Ross Stevens, President | | |
|
| Date 2/6/2017 |
|
| By (Signature and Title)* /s/ Patrick Kelly |
| | Patrick Kelly, Treasurer | | |
|
| Date 2/6/2017 |
* Print the name and title of each signing officer under his or her signature.
4
