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Capstone Investment Advisors Review

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Capstone Investment Advisors

Something that's unique about Capstone Investment Advisors, LLC, or Capstone U.S., is that it only focuses on the management of funds. Therefore, Capstone currently doesn't have any individuals as direct clients.

Capstone is a hedge fund management firm that has approximately 55 financial advisors on staff. The firm has its headquarters in New York City and claims just under $71 billion in assets under management (AUM). It has three investment strategies that it uses to manage the hedge funds under its control.

If you’re an individual looking for a financial advisor, SmartAsset’s advisor matching tool can set you up with one in your area.

Capstone Investment Advisors Background

Paul Britton founded Capstone Investment Advisors back in 2007, and he continues to be the principal owner of the firm to this day. Britton has worked in the financial services industry for around 25 years. Capstone has a presence in both New York and the United Kingdom, and it acquired an additional office in The Netherlands in 2017.

Capstone employs 55 advisors, several of whom have earned professional certifications such as chartered financial analyst (CFA), certified public accountant (CPA) or chartered alternative investment analyst (CAIA).

Capstone Investment Advisors Client Types and Minimum Account Sizes

Capstone Investment Advisors’ client base currently consists of 24 pooled investment vehicles, all of which are hedge funds. These consist of an aggregate amount of investable assets from different investors, which is treated as a single portfolio. The firm only directly advises these hedge funds, but they are available to a wide range of would-be investors, including high-net-worth individuals, family offices, trusts, estates, charitable organizations, endowments and pension plans.

Capstone Investment Advisors doesn’t maintain any sort of minimum requirements for the funds it advises. These funds may themselves have minimum investment amounts for investors, but that will vary on an individual basis.

Services Offered by Capstone Investment Advisors

Capstone Investment Advisors provides investment management services through three platforms: CVM, Solutions and DDA. More specifically, the firm seeks to grow client portfolios through the practice of relative value trading, which is described further below.

Capstone acts as the investment manager for several different hedge funds that are in turn offered to investors on a private placement basis. These vehicles include:

  • CVM
    • Capstone Vol (US), LP
    • Capstone Vol (Offshore) Limited
    • Capstone Volatility Master (Cayman) Limited
  • DDA
    • Capstone Diversified Dynamic Alpha Strategy Fund, LLC
    • Capstone Diversified Dynamic Alpha Fund, Ltd.
  • Solutions
    • CPP-2012-1 Fund Limited
    • Capstone Income Opportunities, Ltd
    • Capstone Income Opportunities II, Ltd.
    • Capstone Equity Replacement Master Fund Ltd.
    • Capstone Equity Replacement Fund (Cayman) Ltd.
    • Capstone Pi Sigma Fund (US) LP
    • Capstone WDV Fund, LLC
    • KS-Capstone Fund Limited
    • Capstone SPC Fund Ltd.
    • Dispersion Funds
      • Capstone Dispersion Master Fund Ltd.
      • Capstone Dispersion Fund (Cayman) Ltd.
      • Capstone Dispersion Fund (US) LP
    • Capstone Full Court Press LP
    • Capstone Phi Kappa Fund Ltd.

Capstone Investment Advisors Investment Philosophy

Capstone Investment Advisors seeks to manage funds with a wide range of investment strategies, but two key strategies are volatility arbitrage and relative value trading. The volatility of a financial asset (usually options, in the case of Capstone) is measured as how significantly it varies from the mean. Volatility arbitrage is the practice of exploiting perceived inefficiencies between how the volatility of an option is priced and how the firm believes it should be priced. As this is a particularly risky form of investing, Capstone has several strategies in place to diversify the way it capitalizes on these inefficiencies.

Relative value trading can take a few different forms, but in general, this is a practice where an investor trades one or more securities in relation to others or the market at large. For example, let’s say you believe Coca-Cola will outperform PepsiCo in the future. To make a relative value trade, you would buy shares in Coke and simultaneously shorting the same amount in Pepsi shares. By doing so, you’re ensuring that you’ll make money no matter how the overall market performs - so long as Coke performs better than Pepsi.

Capstone Investment Advisors Fees

Capstone Investment Advisors charges the hedge funds it manages a varying, percentage-based annual fee. Each type of fund adheres to its own maximum rate:

  • CVM: Up to 2.00%
  • Solutions Accounts: Up to 1.50%
*Estimated investment management fees do not include brokerage, custodial, third-party manager or other fees, which can vary in amount. Fee amounts based on CVM maximum annual rate.
Estimated Investment Management Fees at Capstone Investment Advisors*
Your Assets Capstone Investment Advisorse Fee Amount
$500K Up to $10,000
$1MM Up to $20,000
$5MM Up to $100,000
$10MM Up to $200,000

What to Watch Out For

Capstone Investment Advisors has a couple disclosures listed on its Form ADV. In 2016, the Finnish Financial Supervisory Authority found that one Capstone-sponsored fund failed to submit proper disclosure documents in a timely fashion, which resulted in a $22,000 fine.

Capstone Investment Advisors doesn’t provide financial planning services or work with individual clients. So if you’re an individual seeking investment management and/or financial planning services, you'll need to find another advisor. To check out the options in your area, stop by SmartAsset's advisor matching tool.

Depending on the investment fund, Capstone may also receive performance-based fees. It states in its Form ADV that this may give the firm an incentive to favor these accounts over those that don't pay performance-based fees. Regardless, Capstone is a fiduciary, legally binding it to act in your best interest.

Opening an Account With Capstone Investment Advisors

While the firm only manages hedge funds, you can still contact it by calling (212) 232-1420 or sending an email to investorrelations@capstoneco.com.

Tips for a Successful Retirement

  • Looking for professional help planning and investing for retirement? An advisor can help. SmartAsset’s free tool matches you with financial advisors in your area in 5 minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.
  • Saving for retirement isn’t always easy, but it helps if you have the right tools in place. SmartAsset's guide to the various available retirement accounts can help you determine which makes the most sense for your financial situation.

All information is accurate as of the writing of this article.

How Many Years $1 Million Lasts in Retirement

SmartAsset's interactive map highlights places where $1 million will last the longest in retirement. Zoom between states and the national map to see the top spots in each region. Also, scroll over any city to learn about the cost of living in retirement for that location.

Rank City Housing Expenses Food Expenses Healthcare Expenses Utilities Expenses Transportation Expenses

Methodology To determine how long a $1 million nest egg would cover retirement costs in cities across America, we analyzed data on average expenditures for seniors, cost of living and investment returns.

First, we looked at data from the Bureau of Labor Statistics (BLS) on the average annual expenditures of seniors. We then applied cost of living data from the Council for Community and Economic Research to adjust those national average spending levels based on the costs of each expense category (housing, food, healthcare, utilities, transportation and other) in each city. Using this data, SmartAsset calculated the average cost of living for retirees in the largest U.S. cities.

We assumed the $1 million would grow at a real return (interest minus inflation) of 2%. This reflects the typical return on a conservative investment portfolio. Then, we divided $1 million by the sum of each of those annual numbers to determine how long $1 million would cover retirement expenses in each of the cities in our study. Cities where $1 million lasted the longest ranked the highest in the study.

Sources: Bureau of Labor Statistics (BLS), Council for Community and Economic Research