Stone Ridge focuses on delivering valuable, diversifying return streams sourced from alternative risk exposures – not alpha. They believe strongly in markets and strongly in the link between risk and return. Stone Ridge leverages this link to create global opportunities for portfolio enhancement with a family of risk-specific strategies spanning reinsurance, volatility, and alternative lending. Powered by a close-knit team – with experience in academia, capital markets, and alternative asset management – their investor solutions facilitate access to and execution of complex strategies, making them accessible and cost-effective.
AT A GLANCE
- Manages $9 billion in assets with 85 employees in New York and Beijing
- Serves 150+ fee-based asset allocators (primarily registered investment advisors and multi-family offices) around the country
- Funds take a buy-the-market, systematic approach seeking to harvest uncorrelated risk premiums
- Believes that it is reasonable to expect a profit, in the long run, for the risks that they deliberately bear
INVESTMENT PHILOSOPHY
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, they believe that markets work, so they let the intentional risks we bear deliver the returns we desire. Guessing the future is no way to build long-term wealth – they 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, they strive to deliver the next chapter of financial innovations: valuable, diversifying streams of alternative returns sourced solely from non-traditional risk exposures.
RULES-BASED APPROACH
Stone Ridge’s rules-based approach automates access to and execution of complex strategies making them easily accessible and cost-effective. Their 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.
Stone Ridge’s evolving set of rules aims to systematically capture the returns available from each individual risk they bear. Informed by decades of alternative investment management experience, academic influences, and institutional trading background, their 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 their investors.
NO PERFORMANCE FEES
Stone Ridge’s 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. Their 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 their investors.
TALENT WINS
Their close-knit team of professionals hails from leading global investment banks and alternative asset managers including Goldman Sachs, Morgan Stanley, Citadel, and Magnetar. They also leverage the remarkable analytical talent in China through their partnership with Tsinghua University. Individually and collectively, they are grateful for the opportunity Stone Ridge represents: to apply their expertise towards building long-term wealth for their investors.