Key Takeaways
- • Volatility-focused hedge funds delivered exceptional risk-adjusted returns during market stress, with the CBOE Eurekahedge Tail Risk Hedge Fund index gaining 51.64% in Q1 2020 alone, vastly outperforming the broad hedge fund market index decline of -7.96% during the same period.
- • Tail-risk and long-volatility strategies proved their defensive merit during spring 2020 market dislocations, with the same index finishing 2020 up 34.8% for the full year, demonstrating sustained alpha generation across extended volatility regimes.
- • Capstone Investment Advisors operates a $9 billion global alternative asset management platform specializing in derivative-based strategies and tail-risk solutions, with over 300 team members across eleven offices serving primarily US institutional and pension fund clients.
- • The Solutions business division at Capstone focuses on defensive, tail-risk, and long-volatility strategies tailored to institutional portfolio objectives, working closely with investors to integrate complementary hedging mechanisms into broader allocations.
Summary
Capstone Investment Advisors, a $9 billion alternative asset manager founded by Paul Britton, demonstrated the strategic value of volatility-focused hedge fund strategies during the market dislocations of spring 2020. The CBOE Eurekahedge Tail Risk Hedge Fund index generated exceptional returns of 51.64% during the first quarter of 2020 alone, a period when the broader hedge fund market index declined 7.96%. This performance gap illustrates the powerful defensive characteristics embedded within properly structured tail-risk and long-volatility strategies during acute market stress events.
The index's sustained outperformance extended throughout 2020, finishing the year with a 34.8% gain, validating the hypothesis that volatility-focused strategies provide both tactical hedging benefits and genuine alpha generation across extended periods of elevated market uncertainty. This performance record underscores why institutional investors and pension funds increasingly allocate to such strategies as portfolio insurance and complementary return drivers.
Capstone's Solutions business division specializes in precisely this mandate: providing defensive tail-risk and long-volatility strategies to a primarily US-based institutional and pension fund clientele. The firm's approach involves close collaboration with investors to understand portfolio objectives, existing allocations, and hedging requirements, then structuring derivative-based solutions that address specific risk exposures. With operations spanning eleven global offices and a team exceeding 300 professionals, Capstone maintains infrastructure to service sophisticated institutional clients across multiple geographies and asset classes, positioning itself as a forward-thinking manager dedicated to exploring persistent alpha opportunities within derivatives and complementary strategies.
The index's sustained outperformance extended throughout 2020, finishing the year with a 34.8% gain, validating the hypothesis that volatility-focused strategies provide both tactical hedging benefits and genuine alpha generation across extended periods of elevated market uncertainty. This performance record underscores why institutional investors and pension funds increasingly allocate to such strategies as portfolio insurance and complementary return drivers.
Capstone's Solutions business division specializes in precisely this mandate: providing defensive tail-risk and long-volatility strategies to a primarily US-based institutional and pension fund clientele. The firm's approach involves close collaboration with investors to understand portfolio objectives, existing allocations, and hedging requirements, then structuring derivative-based solutions that address specific risk exposures. With operations spanning eleven global offices and a team exceeding 300 professionals, Capstone maintains infrastructure to service sophisticated institutional clients across multiple geographies and asset classes, positioning itself as a forward-thinking manager dedicated to exploring persistent alpha opportunities within derivatives and complementary strategies.
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