A hedge fund industry veteran has partnered with ANZ’s former head of global markets to launch Australia’s first cryptocurrency-focused managed fund, which will give sophisticated investors exposure to emerging digital currencies with the potential for a 30 per cent annual return.
Triple A Partners director Damien Hatfield said the firm’s new EKT Active Fund, which was seeking to raise $50 million from investors before commencing trading on 1 January, would tap into the current hype around rapidly growing cryptocurrencies such as bitcoin within a traditional fund structure where investors could be confident of security and liquidity.
“We started this project about four or five months ago not anticipating the current move [in bitcoin values]. Our challenges were to find a custodian and administrator because a lot of similar funds are doing their own [administration] and we want to be mindful of presenting a product where traditional investors are comfortable,” Hatfield said.
“We had to be convinced that [our custodian’s] vaulting process was watertight because we have all read about the instances of hacking of cryptocurrency, and we wanted to provide all the safeguards of a typical alternative asset fund.”
He said despite the speculative nature of the emerging asset class, he and business partner Steve Belotti – a former head of global markets at ANZ whose firm Digital Currency Holdings was acting as an adviser on the fund – believed the cryptocurrency market had a “long way to go” before any serious price declines occurred.
“The strategy of the fund is to have a long bias – we will get into the futures market so that we can potentially be long-short at a suitable time, but it’s more to hedge risk,” he said.
“Cryptocurrencies have had a great run and it’s hard to say we are definitely going to get outstanding returns, but we are targeting 30 per cent-plus [returns] and if we are not doing that, then there is something wrong.”
He added the fund would take a conservative approach to the market, holding a significant buffer of cash in reserve and being extremely selective in the new currencies it invested in.
“We are carrying 25 per cent cash at most times to provide liquidity and be able to take advantage of opportunities, and 25 per cent of the holdings will go into ICOs (initial coin offerings),” he said.
“If you had invested in every ICO that has come to market, including some of the terrible ones, you would still have 15 times your money, but we are looking at that segment and applying a very rigid filter, so we will probably only go into 5 per cent to 10 per cent of those ICOs.”''