Stone Ridge: the first mutual fund to buy bitcoin

Stone Ridge could become the first US open-ended mutual investment fund to buy bitcoin.

This can be read in the application filed with the SEC by Stone Ridge Trust regarding its Stone Ridge Diversified Alternatives Fund, which is a fund that aims to generate returns from various high-potential investment strategies.

These explicitly included bitcoin, with which the fund would like to generate returns by earning through direct exposure to its price, or by selling put options on bitcoin futures contracts, or by investing in pooled investment vehicles, such as registered or private funds.

The fund’s investments in the reinsurance, market risk transfer, style risk premium, and bitcoin strategies will vary individually from 0% to 75%, and from 50% to 100% overall. 

How the purchase of Bitcoin will work for the Stone Ridge fund

The document explicitly states: 

“The Fund intends to gain exposure to the price of bitcoin by selling at-the-money or out-of-the-money exchange-traded cash-settled put options on bitcoin futures contracts. This means that the strike price of the put options the Fund sells will be at or below the current price of the underlying bitcoin futures contract when the options are sold”.

Interestingly, the word ‘bitcoin’ appears 575 times in the document, although it is quite a long document with more than 130,000 words. 

Stone Ridge Asset Management is based in New York, and focuses on generating financial returns from alternative risk exposures. 

According to some asset managers, this initiative could open the door to crypto markets for any mutual fund. 

It is worth pointing out, however, that the prospectus submitted to the SEC will only become operative as of April 26th, so only then will the company be able to start buying BTC, or derivative products on BTC.

Among other things, Stone Ridges’s founder, Ross Stevens, has also founded another financial services company focused solely on bitcoin, the so-called New York Digital Investment Group (NYDIG). This is the same company that has applied to the SEC for permission to issue a bitcoin ETF together with Morgan Stanley. 

According to Stevens himself, there may be “a wall of money” ready to enter this new asset class.