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.