AI Hedge Awards 2017

14 Acquisition International - Hedge Fund Awards 2017 Best Quantitative Long/Short Absolute Return Fund: Runestone Capital Fund Runestone Capital Runestone Capital is a London based investment firm operating the Runestone Capital Fund through proprietary systematic models. We invited Rune Madsen and Rasmus Andersen to talk us through the award winning fund. Company: Runestone Capital Name: Rune Madsen & Rasmus Andersen Email: [email protected] Web: www.runestonecap.com Address: 239 Kensington High Street, London W8 6SN, UK Phone: +44 207 316 3084 HF170049 Established in 2014, Runestone Capital was created with the aim to identify unique investment opportunities with superior risk-adjusted performance. The team started to work together in 2008 at Morgan Stanley and over the years this collaboration has helped the firm to develop quantitative and qualitative strategies based on volatility. These back-tested and proprietary active management models are designed for institutional and private investors seeking alpha-driven returns. Rune discusses the firm’s award winning investment product, the Runestone Capital Fund and the approach this takes. “Runestone Capital Fund is an absolute return fund that exclusively trades US equity index volatility. The fund is part of the CBOE Eureka Hedge Relative Value Volatility Index in which we are the best performing fund year to date. The fund takes directional positions on a daily basis, either long or short US Equity Index Volatility. However, it does not have a pre-set bias to be either long or short. All positions are based on statistical probabilities derived from our models, which have built in risk parameters that are designed to provide risk adjusted returns. Periods of high volatility of volatility have led to overall smaller positions due to higher uncertainty and range of outcomes. These risk adjustment features have lowered overall volatility in the fund. “The fund does not target an explicit realised volatility level, but aim to keep our downside volatility in the low teens while maintaining a positive skew. The strategy is not about risk elimination but risk controls and is designed to generate great risk adjusted performance, which so far is on track since inception.” The firms overall mission is to identify unique investment opportunities with superior risk-adjusted performance. Rune outlines how its innovative investment approach helps it to achieve this ambitious goal. “At Runestone Capital, we aim to reach our goal by utilizing our quantitative and qualitative strategies based on volatility. In order to have an edge a fund needs to be dedicated, which we are as we only invest in US equity index volatility. The asset class is also a non-crowded asset class despite its deep liquidity. “In addition, our investment approach operates freely without pre-set biases for our investments. The models all operate in real-time and we rebalance our portfolio daily. The systematic discipline combined with occasional discretionary risk reductions, has enabled us to produce positive returns in a wide array of market conditions.” This flexibility is vital, as it allows the firm to develop around the latest changes in the market, as Rune explains. “In order to stay at the forefront of emerging industry developments we implement quantitative driven models and are constantly researching the existing framework, as well as analysing ways to improve our performance. Our focus is on short term strategies that are adaptable to a wide range of scenarios and hence optimally placed to perform well over the cycle. We are convinced that by employing a systematic approach we are removing ego and emotions from the process, which has shown improved risk/return characteristic over time.” Rune concludes by outlining the firm’s future and the exciting developments it has on the horizon. “Moving forward, our main focus is the continuation of the strategy as we grow assets. We are receiving increasing levels of interest, particularly from the US, so we expect to launch a US focused share class in the near future. Currently we focus on managing the fund and do not offer other financial services, but we are open to the possibility of setting up separate managed accounts if the opportunity is significant.” “At Runestone Capital, we aim to reach our goal by utilizing our quantitative and qualitative strategies based on volatility.”