In The News - EuroHedge - Crypto-focused funds progress in volatile year

Despite a wildly volatile year for cryptocurrencies, European managers focused on the space have managed to attract investor interest while cashing in on their long and short bets.

By Ludovica Brignola

According to US-based digital currency exchange Coinbase, Bitcoin, the world’s largest cryptocurrency by market capitalisation, gained 57% so far this year despite a huge drop of 51% in only one day of trading on 13 March…

Neil Panchen, CTO at London and Monaco-based alternative firm Altana Wealth, which manages cryptocurrency-focused funds Altana Digital Currency Fund and Altana Cryptocurrency Trade Finance among other funds, also says that this year has been significant in terms of institutional investors’ interest for the strategy. Together, the two funds manage in excess of $50m in AuM.

“We have had enquiries from endowments recently, who are interested in differentiating their portfolios. Many allocators have reduced their equity exposure and are looking for alternative sources of returns, given that interest rates are very close to zero,” said Panchen, adding that 2020 has seen inflows into the fund more than double.

“Differently than 2016/2017, I think the bulk of the interest now comes from the sophisticated rather than retail investors, who are looking for ways to profit from the devaluation of fiat currencies, following record post-2008 money printing by governments worldwide.”

The vehicle, which was launched in 2014, has returned 63% so far this year, after a 75% gain last year but a loss of 78.6% in 2018. It trades cryptocurrency in proportion to their market capitalisation and has exposure to digital coins’ spot prices, but not to their derivative instruments as they are viewed as “extremely volatile”…

Secondly, the sector isn’t viewed with great confidence yet as the main crypto exchanges are still unstable and subject to frequent hacking attacks. “Exchanges are though getting better and better in their credit situation: their net income ratio is very high and with increasing liquidity the reliability and the credit rating of the exchanges is growing very quickly,” Panchen said, hinting that this might be a major factor that will encourage institutional investors to take the plunge in the asset class…

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