AI Issue 6 2018

64 Acquisition International - Issue 6 2018 Runestone Runestone Capital Ltd was founded in 2014 in London to identify unique investment opportunities with superior risk-adjusted performance. The Runestone Capital Fund was launched in May 2015. Rune Madsen and Rasmus Andersen have worked together in London since 2008 at both Morgan Stanley and Credit Suisse and have over 30 years of investment experience. The firm specializes in quantitative and qualitative strategies based on volatility. The firm’s back-tested and proprietary active management models are designed for institutional and private investors seeking alpha-driven returns. We founded Runestone Capital to freely express our individual investment views, without the restrictions of an investment bank. After building a successful active wealth management franchise over 15 years, we wanted to create our own firm to solely express our own views, not a centralized view. We had a strong conviction in our back-tested, proprietary model, so we funded the firm with solely our own capital. We believed and still believe that this is the biggest opportunity we have ever seen in our investment careers, hence the creation of Runestone Capital. mplied volatility and Runestone Capital Fund In our view, volatility is an emerging, undercrowded and commonly misunderstood asset class that offers very interesting and infinite investment opportunities. Volatility is perpetual as it is always in motion and since we have a one-day forward strategy we are not structurally positioned for specific markets. The fund is not a tail-event fund and will take advantage of markets with both increasing and decreasing 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 strategy aims to capitalize on capturing movements in implied volatility, primarily related to the Chicago Board Options Exchange Market Volatility Index (VIX) futures. We are a small firm, so it is important to work out issues with quickly when the occur. We work with a performance coach to be sure we are objective with ourselves and our teammates. The culture of the firm is to never take anything for granted and keep on improving. The Runestone culture is to cultivate innovation, have a top-notch product, critical thinking, respect for your teammates, allow for personal differences, promote the team and aim to have fun doing it. Company: Runestone Capital Ltd Address: 239 Kensington High Street London, W8 6SN, UK Email: [email protected] Telephone: +44 20 7316 3084 Runestone Capital I We implement quantitative driven models and are constantly researching existing frameworks as well as analyse ways to improve performance. Our focus is on short-term strategies that are adaptable to a wide range of market scenarios and hence optimally placed to perform well over a cycle. We are convinced that by employing a systematic approach, portfolio manager emotions and ego can be eliminated from the investment process, which has shown improved risk/return. 2017 in review: A low volatility year Runestone Capital Fund returned +4.7% in 2017 with a very low standard deviation of 3.2% and delivered -11% negative correlation to S&P 500. In order words, the fund was a return contributor as well as a risk diversifier which are difficult attributes to obtain. The current year, 2018, has started with a drawdown in performance but the opportunity set is now better than in many years due to higher levels of absolute volatility in the equity markets. In hindsight, the opportunity set in 2017 was tilted towards short volatility positioning given that it turned out to be the lowest equity index volatility year on record. Runestone Capital employs a strong risk management framework, which among other things will limit significant short positions to be established in this type of environment (due to the potential risk of significant drawdowns if volatility moves in the opposite direction). In 2017, this caused the fund to reduce capital exposure to an overnight average position of only 3% of the capital. The year ended with strong risk-adjusted returns of 1.5x (Sharpe) and 1.8x (Sortino) using weekly figures – which is in line with historical averages. “We implement quantitative driven models and are constantly researching existing frameworks as well as analyse ways to improve performance.”