Our series on bitcoin hedge funds continues below. Updated: December 4
Over the year we’ve tried to keep track of all the developments in the hedge fund — crypto world. Unfortunately, the industry is developing so rapidly, we’ve almost certainly missed a number of the young sector’s developments.
Nonetheless, as the industry matures and gains recognition, it should become easier for investors and analysts alike to keep abreast of developments.
Over the year, crypto hedge fund startups have become a hot investment class. As I reported previously, at the end of September, UK research outfit Autonomous NEXT counted 68 crypto hedge funds in action with several more in the pipeline. Since then, it’s not clear how many funds have sprung up as many fly under the radar.
The best crypto funds around
While a number of funds look to be nothing more than get-rich-quick schemes from inexperienced owners, there are a number of crypto funds with more established records and experienced backers. For example, Altana Capital was founded in 2009 and is one of the more established crypto investors that avoids ICOs. The wealth-manager’s bitcoin-trading fund was up nearly 500% for the year through Sept. 11 according to the Hedge Fund Alert newsletter. A separate trade-finance vehicle, which lends U.S. dollars to bitcoin traders, was up 20% on an annualized basis through the end of August.
Then there’s MataStable Capital, which launched a buy-and-hold cryptocurrency fund in 2014 and is currently closed to new investors. This firm has the backing of Andreessen Horowitz, Bessemer Venture Partners, Founders Fund, Sequoia Capital and Union Square Investors. According to Fortune, the fund has produced returns exceeding 500%.
A better-known investor in crypto assets is John Burbank’s Passport Capital. Burbank has been investing in the sector for years and recently began investigations into opening a specialist cryptocurrency fund under the Passport name. It has hired a number of crypto-focused investment staffers.
The best-known fund in the space has to be Olaf Carlson-Wee’s Polychain Capital. Carlson-Wee, was one of the first employees of cryptocurrency exchange Coinbase and his fund manages some $350 million of assets, with investments from venture capital titans Andreeseen Horowitz, Founders Fund, Sequoia Capital and Union Square Ventures. Trading is largely limited to select ICOs, aiming to get in before the public phase of the offerings.
Dan Morehead’s Pantera Capital claims to be one of the largest owners of bitcoin. The firm was founded in 2003 and Morehead previously worked for Tiger Management.
Updated: November 20
As Mike Novogratz tries to bring some kind of institutional backing to the cryptoasset industry at one end of the market, at the other end, traders and speculators looking to make a quick buck continue to run riot.
The latest a high dubious offering comes from management company, SYMM, which has recently announced the launch of new a cryptocurrency investment fund, offering a uniquely new commission structure to investors.
SYMM is launching the Symmetry Fund, which is the first crypto fund to offer buyback options for shareholders. According to the firm’s press release, the fund has been designed to “make it easy for individuals to invest in cryptocurrencies without all the effort, capital and risk involved with personal trading in the market.”
Here’s some more info on the offering:
“The SYMM fund invests in Bitcoin, Ethereum, Dash, Lite Coin and Ripple so offers a diversified portfolio for those looking for the safety of a traditional managed mutual fund, but still benefit from the gains being seen in the rising cryptocurrency markets, especially lucrative ICOs (Initial Coin Offerings).”
The fund will pay monthly dividends equivalent to 50% of trading profits in Ethereum with the remaining 50% reinvested and investors are able to pick up the buyback option at any time.
In order to mitigate volatility, the fund will keep 10% of its assets in flat currencies (US$/€). Management fees are “competitive” and charged on profits at 7.5% for investments over 100 ETH and 15% for under 100 ETH.
So far, the bitcoin hedge fund world has been able to get away with almost no regulation but as bitcoin trading becomes more mainstream, it will attract regulators.
The CME Group is planning to launch a bitcoin futures contract, which will have to be approved by regulators. And when the contract is approved, there are many funds currently standing on the sidelines that would like to be involved.
Indeed, $100 billion hedge fund Man Group recently declared that it would be interested in trading bitcoin if or when the CME product hits the market. This would likely be the first of many entries into the market by mainstream hedge funds.
Published on: Oct 25
With the cryptoasset industry booming, and star fund managers such as Michael Novogratz planning to launch a half billion dollar cryptoasset fund, it was only a matter of time before crypto funds-of-funds started to appear.
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Bloomberg reports that the first crypto fund-of-funds is currently under development by serial entrepreneur and venture capitalist Rick Marini, who wants to raise $100 million to invest in 10 crypto-focused hedge funds.
Marini’s fund won’t have difficulty in finding funds to allocate its cash to. 84 crypto hedge funds have opened this year, a jump from 11 last year, according to research by Autonomous Next.
“Our current view is that 75%+ of these funds were started in 2017, that in total they manage between $2 and $3 billion, but aspire to manage $8 billion, and that size is concentrated among the few early movers like Pantera and Polychain.”
These funds only account for a small part of the crypto asset market. Autonomous Next notes that year-to-date, $3.04 billion has been raised through initial coin offerings, up from just $222 million last year.
And it looks as if opening a crypto fund is about to get a whole lot easier for traders.
Move Over Mike Novogratz
Traditionally, to open a hedge fund, you have to spend time building your own reputation, complying with legal requirements, finding anchor capital for investment, marketing and finding brokers to work with. All of which takes time, experience and money.
However, in the world of bitcoin, there’s no room for such old-fashioned methods. According to a new service called Fund Platform “there are not enough cryptocurrency funds in the world because development costs a lot of money” so, it has set out to rectify this problem.
According to its marketing materials, Fund Service “acts as a platform where traders in private offices create funds in a few minutes” and traders can create funds “without pouring huge amounts of money into marketing and creating websites.”
It looks as if the crypto fund boom is only just getting started. Expect to see another spike in fund launches next year. Caveat emptor.
Mike Novogratz Believes Bitcoin Is Going To $10,000. Updated: Oct 11, 2017
As we reported a few weeks ago (see below) Mike Novogratz, a former principal at investment firm Fortress and an ex-partner at Goldman Sachs, loves bitcoin and all of its cryptocurrency counterparts. He loves the asset class, and opportunities presented so much that he's planning to start a $500 million hedge fund for cryptocurrencies, token sales and related startups.
Novogratz, who has a reputation for not being afraid to make big, bold bets, is putting $150 million of his own money to the venture, and aims to raise the rest by January, CNBC reports.
In an interview with CNBC, Novogratz declared that rather than focus on a narrow range of cryptocurrencies, like other funds in the space, the Galaxy Digital Asset fund will instead "play the whole ecosystem:"
"I never thought I'd come out of retirement but the space is so exciting right now I decided to build a business, hire a whole bunch of smart guys, and we're gonna to raise a fund ... and hopefully take advantage of what I see as a revolution, actually. A decentralized revolution."
Mike Novogratz: Bitcoin is heading to $10,000
Bitcoin has attracted plenty of criticism from other high profile financiers this year, with many calling it a bubble and JP Morgan boss Jamie Dimon labeling it a "fraud."
However, despite all of this criticism, demand for bitcoin and its peers has remained strong. Even rumors that Russia and China might move to ban bitcoin have not dented demand.
According to Novogratz, this mania is justified, because it is a technological advancement that promises to fundamentally alter our lives. In the interview with CNBC he said, "Remember, bubbles happen around things that fundamentally change the way we live...The railroad bubble. Railroads really fundamentally changed the way we lived. The internet bubble changed the way we live. When I look forward five, 10 years, the possibilities really get your animal spirits going."
And according to Novogratz, bitcoin is set to become "the biggest bubble of our time," and could reach $10,000 very soon due to fast-building interest.
The full video: Hedge fund legend Novogratz betting it all on bitcoin
As Mike Novogratz Goes In On "Biggest Bubble Ever", Youngsters Try To Get In On The Action: Updated Sep 27, 2017
Whether you love them or hate them, it looks as if bitcoin and its cryptocurrency pals are here to stay. The industry has grown in size so rapidly over the past two or three years that it has now achieved a sort of legitimacy by size. Tens of billions of dollars have been invested in currencies themselves as well as products designed to profit from market movements. The number of initial coin offerings and crypto hedge funds seeking funding has exploded this year, and this week it has been revealed that Mike Novogratz, formerly macro manager at Fortress Investment Group, is trying to make a comeback by launching the world’s largest bitcoin hedge fund with an estimated $500 million.
More hedge funds set for launch, average PM age is 25
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