Markets Work

Centuries of financial history have shown that markets reward investors for the capital they supply and the risks they bear. Competition quickly drives prices to fair value, leaving only risk premium. Yet many managers and investors chase alpha, an often expensive and dangerous pursuit. At Stone Ridge, we believe that markets work, so we let the intentional risks we bear deliver the returns we desire. Guessing the future is no way to build long-term wealth – we believe taking intelligent, controlled, and diversified risks is a far more reliable strategy.

Great financial innovations of the last few decades led to investment products that efficiently capture traditional market risk premium – for example, stocks beat cash over time because stocks are riskier. In traditional asset classes like equities and fixed income, passive, long-only products are sufficient to capture the beta. Such products are valuable, have enormous capacity, and deserve their rightful place in every investor’s portfolio. At Stone Ridge, we strive to deliver the next chapter of financial innovations: valuable, diversifying streams of alternative returns sourced solely from non-traditional risk exposures.

Next: Rules Based Approach >>

Rules-Based Approach

Stone Ridge’s rules-based approach automates access to and execution of complex strategies making them easily accessible and cost-effective. Our concepts may be easy to explain, but systematically capturing our target betas – in areas as varied and specialized as reinsurance, implied volatility, downside risk, momentum, and mergers - requires a high-level of research, execution, and operational excellence.

Our evolving set of rules aims to systematically capture the returns available from each individual risk we bear. Informed by decades of alternative investment management experience, academic influences, and institutional trading background, our rules draw upon almost a century of asset price data across a wide spectrum of asset classes and market regimes. The overall result is an automated, process-driven collection of investment strategies designed to build long-term wealth for our investors.

<< Prev: Markets Work

Next: No Performance Fees / Talent Wins >>

No Performance Fees

Our philosophy of sourcing valuable risks (instead of alpha) is inconsistent with charging performance fees. When you source priced risks, returns are reliably positive on average, but unpredictable over any particular interval. Some years are great, others can hurt – it is simply a function of when the intentional risk-bearing pays off. Our team has the expertise to identify priced risk factors, design automated trading strategies to capture them, and dynamically manage the risks within carefully structured portfolios. The excess returns these portfolios deliver over time belong solely to our investors.

Talent Wins

Our close-knit team of professionals hails from leading global investment banks and alternative asset managers including Goldman Sachs, Morgan Stanley, Citadel, and Magnetar. Individually and collectively, we are grateful for the opportunity Stone Ridge represents: to apply our expertise towards building long-term wealth for our investors.

<< Prev: Rules Based Approach