Stone Ridge Asset Management will make Bitcoin part of its seven strategies for the Stone Ridge Diversified Alternatives Fund. According to the SEC filing, the addition will become effective on April 26.
The Stone Ridge Diversified Alternatives Fund is focused on investment strategies with potentially high returns. They do so while diversifying away from stocks and bonds. It will focus on key investments which includes healthcare royalties, alternative lending, and single-family real estate.
Stone Ridge released a statement and spoke on the Bitcoin strategy. “[The] Bitcoin [strategy] seeks to generate returns by gaining exposure to the price of bitcoin by selling put options on bitcoin futures contracts. This strategy may also invest in pooled investment vehicles, such as registered or private funds, that themselves invest in bitcoin.”
The fund will have exposure to Bitcoin through put options on Bitcoin futures contracts. This is when a trader agrees to buy a certain amount of Bitcoin futures at a certain price in the future. They are not obligated to do so in the end, however.
Stone Ridge To Gain Exposure To Bitcoin
Stone Ridge also spoke on the fund’s intention of gaining exposure. “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.”
The asset management group also added that the fund “may also seek exposure to the price of bitcoin by investing in other pooled investment vehicles, such as registered or private funds, that invest in bitcoin directly.”
Stone Ridge noted in its SEC filing that Bitcoin is volatile and could decline rapidly, potentially going to zero. This is customary in SEC filings related to the crypto. They also added that political or economic crises could cause large sales of Bitcoin, damaging its price.
The founders of Stone Ridge have long been bullish of Bitcoin and have invested in it personally. In fact, they invested so much personally that they needed to find a way to store the funds safely.
That need caused them to create a subsidiary, the New York Digital Investment Group. So far, the NYDIG has raised over $100 million two years.