The Fund

Runestone Capital Fund & the Runestone Capital U.S. Fund are funds of a collective investment scheme, HFH SICAV plc (the “Company”), organised as a multi-fund company with variable share capital under the laws of the Republic of Malta and licensed by the Malta Financial Services Authority (“MFSA”) under the Investment Services Act (Chapter 370 of the Laws of Malta) as a Professional Investor Fund promoted to Qualifying Investors.

 

What is the Runestone Capital Fund and the Runestone Capital US Fund

The Runestone Capital Fund are for non-US investors and the Runestone Capital U.S. Fund is for US and non-US investors. The investment strategy for the two funds are identical. Runestone Capital Fund won the EuroHedge Emerging Manager Award for best Macro, CTA & Volatility Fund Link

 

Fund Statistics

Link

 

Fund Description and Objectives

Runestone Capital Fund is an absolute return fund that aims to generate in excess of 20 percent net annualized returns over a cycle, regardless of market conditions. The strategy buys or sells US equity index volatility based on statistical probabilities. It has been back tested from January 1st 2006 and has been in fund format since May 2015. It has shown uncorrelated returns to the S&P 500, US Treasuries and the VIX (volatility) itself. Runestone trades volatility instruments based around VIX futures, exchange traded notes (ETN) and funds (ETF), which derive their value from VIX futures.

The strategy will be long or short volatility based on the models and portfolio manager discretion. The strategy has been back-tested for 9 years and it is centered on proprietary models, which was built based on our practical, real-life trading experience over a period of years. The Fund will have a monthly investment redemption cycle and it will be denominated in USD. Both funds are self-managed open-ended sub funds of HFH SICAV plc and is licensed as a Professional Investor fund by the MFSA, only to be promoted to qualifying investors. They have non-distributing share classes with a monthly Net Asset Value (NAV) in US dollars.

 

Awarded Membership In CBOE Eurekahedge Relative Value Volatility Index

The fund’s B share class is part of the CBOE Eurekahedge Relative Value Volatility Index, which consists of 35 funds in the sector chosen by Chicago Board of Options Exchange and Eureka Hedge. CBOE is the issuer of the VIX. For more details about the index please see Link

Eurekahedge also published a very informative article in September 2016 about volatility hedge funds, which discusses the characteristic of the different subset of strategies. Link

In February 2016, CBOE released a white paper that analyses the use of benchmarks indices to measure the effectiveness of volatility-based hedge funds in diversified portfolios. The paper highlights the features of the 4 different sub-indices, what they have to offer both on a stand-alone basis and against other asset classes. For any investor interested in investing in volatility based hedge funds, this should be an interesting perspective as many investors classify volatility into one single bucket with little differentiation. The paper illustrates different scenarios for the 4 different volatility sectors, historical returns and statistics. The report can be found on Link

 

Why Volatility as an Asset Class  

  • Volatility is negatively correlated to the equity market, making it a true alternative asset class
  • Equity market valuation or level is not a driving factor for future fund performance and hence eliminates the equity market timing factor when to invest in volatility
  • Volatility has different risk return characteristics than the equity market hence a diversification factor

 

Why Runestone Capital

  • Experienced team that has traded volatility in exchange trade note format since inception and financial instruments for over 28 years
  • Model that has been back tested and live for 11 years with superior results with only one down year
  • In the live period the fund has outperformed its peer group of volatility funds, CTA’s, global hedge funds, the equity market, and the bond market.
  • Main objective is risk adjusted returns with multiple risk controls in place
  • The managers are deeply invested in the fund with all other liquid sold to be fully invested into the fund, so investors and the managers interest are aligned
  • The managers just invest in US Equity Index Volatility so they are more focused than multi strategy managers, which is shown in the risk adjusted performance

 

Why Now

  • Volatility as an asset class is still a microscopic part of investors overall portfolio despite it being so influential in investors mind set. This makes the asset class less crowded, which should make positive returns more likely
  • Volume in volatility traded products has expanded to over $8Bn per day and to over $30Bn per day during days with market stress. This makes the market impact of our fund minimal even if we grew to $1Bn in AUM
  • The asset class is in our view on the cusp of high growth going forward, and Runestone Capital Fund will be in the forefront of this with its unique strategy