The Fund (the fund is closed)

 Fund Description and Objectives

Runestone Capital Fund was an absolute return fund that aims to generate in excess of 20 percent net annualized returns over a cycle, regardless of market conditions. The fund invested in US equity index volatility on a one-day forward basis based on statistical probabilities. The fund was non-biased in terms of direction and take either long or short implied volatility exposure. The strategy has been back tested from January 1st 2006. It has shown uncorrelated returns to the S&P 500, US Treasuries and the VIX (volatility) itself. It traded volatility instruments based around VIX futures, exchange traded notes (ETN) and funds (ETF), which derive their value from VIX futures.

 

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 1Link 2

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 30 years
  • 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 we are more focused than multi strategy managers

 

Why Now

  • Volatility as an asset class is still a very small 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
  • 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