Capstone Investment Advisors, a hedge fund firm with $2.4 billion in assets, sold a minority stake to a private equity fund run by Neuberger Berman Group, according to a letter sent to Capstone's clients on Monday.
Dyal Capital Partners paid $60 million for 20% of Capstone, according to two people with knowledge of the transaction, who asked not to be identified because the deal is private. Dyal will be a passive investor and will have no day-to-day control of the fund, according to the letter from Paul Britton, Capstone's CEO.
“This investment enables us to further align ourselves with our fund investors by placing a greater amount of our net worth in our fund,” Mr. Britton wrote in the letter. The bulk of the after-tax proceeds from the sale will be invested in the firm's main Capstone Vol fund, he said.
Capstone, based in New York, was founded in 2004 and initially managed internal capital and separate accounts. The Vol fund, started it 2007, uses options to bet on fluctuations in prices across equity, bond, currency and commodity markets.
The fund, one of the largest volatility funds in the industry, has returned an average of 10% a year since 2007, according to investors.
Capstone is the seventh investment for Dyal, which raised $1.28 billion to buy minority stakes in 12 to 15 established hedge funds. It has taken minority stakes in firms including MKP Capital Management, Halcyon Asset Management and Scopia Fund Management, investing more than half its capital.
“Capstone is an excellent manager with a unique investment approach, and we look forward to a long partnership with Paul and his team,” said Michael Rees, senior portfolio manager for Dyal.
Shawn Pattison, a spokesman for Capstone at Abernathy MacGregor, declined to comment on the terms of the transaction as did Alex Samuelson, a spokesman for Neuberger Berman in New York.