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Firm Overview


KStone Partners LLC (“KStone”) as a privately owned alternative asset management company founded in 2008.
KStone aims to deliver superior investment results for a given level of risk.

Competitive Advantage

KStone’s CIO has a long track record of managing alternative investment funds that generated attractive risk-adjusted investment performance for investors in fund of hedge funds.

Asset Allocation

KStone pursues an investment strategy that is premised on the benefits of diversification. KStone primarily invests in a portfolio of lower risk non-directional hedge fund strategies which include arbitrage and relative value strategies such as merger arbitrage and convertible arbitrage.

Risk Management

KStone’s principal focus is on risk management at the fund and investment manager levels, controlling volatility and protecting against downside risk. KStone conducts in-depth structural risk analysis of high potential hedge fund managers.

Investment Highlights

Attractive Investment Performance, Experienced Management, Proven Investment Philosophy and Focused Risk Management

  • Risk Management

    KStone’s primary focus is on risk management at the fund and underlying manager levels and KStone seeks to control volatility and preserve investors’ capital.

  • Investment Philosophy

    KStone primarily invests in a diversified portfolio of lower risk, non-directional alternative strategies. KStone seeks to achieve returns that exceed the risk-free rate of return, with volatility similar to fixed income markets.

  • Management

    KStone’s CIO has specialized for more than twenty years in the investment philosophy that KStone pursues. KStone’s senior team has substantial and diversified business and investment experience.

  • Investment Performance

    The accounts that KStone manages have generated superior risk-adjusted returns. KStone’s funds are not dependent on the performance of the equity markets for returns.

Objective

  • Deliver superior investment results for a given level of risk
  • Develop innovative and attractive investment products
  • Offer an exceptional level of service to investors
  • Assemble and motivate a talented and dedicated team of hard working professionals

Values

  • Conduct our business with integrity
  • Treat everyone with respect
  • Believe in personal responsibility and accountability
  • Maintain a healthy entrepreneurial environment

INVESTMENT PHILOSOPHY

 KStone seeks to generate superior risk-adjusted returns in all economic environments.

  • KStone seeks to generate absolute, above market risk-adjusted returns for inststutions and high net worth individuals by constructing low volatility portfolios with low correlations to the equity and fixed income markets
  • KStone’s Funds primarily invest in managers that have track records of generating superior risk-adjusted returns and have funds with assets less than $1 billion
  • The Funds invest in a diversified portfolio of primarily lower risk, credit-related, non-directional arbitrage and relative value strategies
  • The Funds are constructed to manage their volatility (Standard Deviation) and correlations to the S&P 500 Total Return and BarCap US Fixed Income Aggregate Index
  • KStone seeks to invest in portfolio managers that have marketable securities underlying their strategies as the Funds provide investors with quarterly liquidity
    • KStone attempts to avoid investing in managers pursuing illiquid strategies
  • The Funds do not utilize leverage at the portfolio level and generally invest in underlying managers that use reasonable leverage

INVESTMENT PROCESS


The process starts with our investment philosophy and
includes four major stages

Research

Manager research and screening process results in a list of potential investment opportunities, i.e., “Managers of Interest” that are reviewed by the Investment Committee

Structural Risk Analysis

KStone creates a proprietary report for all managers being actively considered

  • Thorough due diligence is completed for every investment
  • Structural Risk Analysis is conducted on an ongoing basis throughout the life of an investment

Risk Management

Traditional asset management tools are applied to alternative investing

  • KStone completes analysis at the manager and portfolio level

Portfolio Management

Portfolio construction is driven by top-down macroeconomic views coupled with bottom-up manager identification

  • Managers and portfolios are actively monitored
  • A “Watch List” is maintained for possible reallocations

BENEFITS OF INVESTING IN KStone’s FUNDS OF HEDGE FUNDS


Potentially Better Risk-Adjusted Returns

May be able to generate alpha through manager selection, portfolio construction and active oversight

Expertise, Due Diligence & Monitoring Requirements

  • Hedge funds are complex and require in-depth analysis and expertise
  • Substantial time commitment is required prior to investing and once invested

 Risk Reduction

  • Generally, funds of hedge funds have lower correlations to equity and fixed income markets than individual hedge funds
  • Non-directional hedge funds are a different asset class from traditional asset classes
  • Limits downside risk of an individual hedge fund blowup

Access

Enables investors to invest in hedge funds that they would otherwise not be able to access

 Volatility

Investors benefit from consistency and compounding rather than magnitude of returns

Informational Advantage

Constant monitoring of markets and alternative strategies allows funds of hedge funds management to shift among strategies quickly and efficiently to take advantage of opportunities

Diversification

  • Fund of hedge fund diversification likely more effective than investor just adding direct fund investments
  • Different hedge fund strategies work better at different times so having a diversified portfolio of strategies is desirable
  • Permits diversification that is not possible given high minimum investments for most hedge funds

Price for Funds of Hedge Funds Benefits

Incremental fees are modest compared to substantial additional benefits to investors