Stone Ridge Asset Management, filed a new prospectus with the US SEC to add bitcoin to their open-end mutual fund. The Fund is part of an investment portfolio of Stone Ridge Trust.
The prospectus for Stone Ridge Bitcoin Strategy Fund appeared on the SEC website on Friday, though the actual filing date is July 26, 2021. The filing was made under SEC Form N-1A. The form is required for establishing open-end management companies, including mutual funds. In terms of structure, the Fund is very similar to the NYDIG Bitcoin Strategy Fund II filed in May 2021.
According to the prospectus, the primary investment objective of the Stone Ridge Bitcoin Strategy Fund is “capital appreciation”. The Stone Ridge Fund Fund seeks exposure to Bitcoin via futures markets as opposed to spot purchases, as explained below:
“The Fund pursues its investment strategy primarily by investing in bitcoin futures contracts and in pooled investment vehicles that invest directly or indirectly in bitcoin (collectively, “bitcoin-related investments”). The Fund does not invest in bitcoin or other digital assets directly.”
The prospectus also states that the Fund “expects to have significant holdings of cash, U.S. government securities, mortgage-backed securities” and other assets.
Target Exposure of Stone Ridge Bitcoin Fund
“The Fund seeks to invest in bitcoin-related investments so that the total value of the bitcoin to which the Fund has economic exposure is between 100% and 125% of the net assets of the Fund “.
There can be no assurance that the Fund will be able to achieve or maintain the Target Exposure. The Fund generally expects to seek to maintain exposure to the value of bitcoin equal to 100% of its net assets. However, it may increase such exposure to try to offset any negative futures basis that may exist.
The Fund may also experience tracking error (i.e., the Fund may underperform a direct investment in bitcoin) for other reasons. To the extent that the Fund’s economic exposure to bitcoin exceeds 100% of its net assets. As generally it will have leveraged exposure to the value of bitcoin.
It may also obtain leverage in the form of borrowings, which would typically come from loans from banks. The loan may be on a secured or unsecured basis and at fixed or variable rates of interest. The value of an investment in the Fund will be more volatile and other risks tend to be compounded to the extent that it is exposed to leverage.
The Fund’s size will be limited by Chicago Mercantile Exchange (“CME”) position limits. Which will prevent any single investor, from holding more than a specified number of a particular type of futures contract.