Risk Disclosures
Investors should carefully consider the risks and investment objective of the Stone Ridge High Yield Reinsurance Risk Premium Fund (“SHRIX”), the Stone Ridge Reinsurance Risk Premium Interval Fund (“SRRIX”), (together, the “Funds”) 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 the Funds 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. Principal loss is possible.
The reinsurance industry relies on risk modeling to analyze potential risks in a single transaction and in a portfolio of transactions. 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. Sponsors of reinsurance-related securities typically provide risk analytics and statistics at the time of issuance that typically include model results.
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. Such losses may be substantial. The reinsurance-related securities in which the Funds invest are considered “high yield” or “junk bonds.”
The Funds may borrow or enter into derivative transactions for investment purposes, which will cause these Funds to incur investment leverage. Therefore, the Funds are subject to leverage risk. Leverage magnifies a Fund’s exposure to declines in the value of one or more underlying investments or creates investment risk with respect to a larger pool of assets than the Fund would otherwise have. This risk is enhanced for SHRIX and SRRIX because they invest substantially all their assets in reinsurance-related securities. Reinsurance-related securities can quickly lose all or much of their value if a triggering event occurs. Thus, to the extent assets subject to a triggering event are leveraged, the losses could substantially outweigh a Fund’s investment and result in significant losses to the Fund. The 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, each of the Funds will normally invest significant amounts of its assets in non-U.S. entities. Accordingly, each Fund may invest without limitation in securities issued by non-U.S. entities, including those in emerging market countries.
Foreign issuers could be affected by factors not present in the U.S., 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 U.S. These risks are greater in emerging markets.
The Funds may invest in illiquid or restricted securities, which may be difficult or impossible to sell at a time that the Funds would like without significantly changing the market value of the security. Each Fund intends to qualify for treatment as a regulated investment company (“RIC”) under the Internal Revenue Code. The Funds’ investment strategy will potentially be limited by their 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 the Funds’ 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 and statement of additional information.
SRRIX has an interval fund structure pursuant to which it, subject to applicable law, conducts quarterly repurchase offers of its 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 SRRIX’s outstanding shares. In connection with any given repurchase offer, it is possible that SRRIX 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. SRRIX’s shares are not listed, and SRRIX does not currently intend to list its shares for trading on any national securities exchange; the shares are, therefore, not marketable, and 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.
Prospectus and Fund Distributor
You should consider the investment objectives, risks and charges and expenses of SHRIX and SRRIX carefully before investing; the prospectus for each Fund contains this and other information about each Fund. A prospectus may be obtained by calling 855-609-3680 or visiting www.stoneridgefunds.com. The relevant prospectus should be read carefully before investing.
SHRIX is distributed by Foreside Global Services, LLC and SRRIX is distributed by Foreside Financial Services, LLC.
