20/04/20

HONG KONG: 1st-Ever Bitcoin Hedge Fund Targets $100M AUM in 1 Year.

As published on financemagnates.com, Monday 20 April, 2020.

Hong Kong’s first-ever government-approved cryptocurrency fund has been launched by Arrano Capital, the blockchain arm of Venture Smart Asia Ltd., according to a report from Bloomberg. The fund, which will track Bitcoin prices, has a target size of $100 million AUM within the first year, and will offer investors in Hong Kong the opportunity to invest in Bitcoin through a regulated vehicle.

The announcement follows the news that Hong Kong’s Securities and Futures Commission (SFC) approved licensing conditions for Arrano earlier this month.

While the SFC has previously granted operational licenses to crypto asset managers (ie Diginex), the occasion marks the first time that regulators in Hong Kong approved such a fund since they began seriously exploring methods of regulating and overseeing the cryptocurrency industry roughly one year ago.

Avaneesh Acquilla, Arrano’s Chief Investment Officer, told Bloomberg that “we decided to launch this fund to address market demand from professional investors who are increasingly focused on Bitcoin as an alternative store of value,” said Acquilla. “Ultimately for Bitcoin to be widely accepted and for people to trust it, there needs to be regulation.”

Arrano also has plans to launch a second fund–an actively-managed fund based on a number of different digital tokens–later this year.

Cryptocurrency-based hedge funds have continuously gained traction throughout the last several years as a number of them have continuously reported eye-popping gains; however, many of these gains have also been accompanied by major losses.

For example, CoinDesk reported at the end of last month that Polychain Capital’s first four years tell a dramatic tale of ups and down: after a 2.7 percent loss in 2016, the fund saw a whopping 2,278.8 percent gain in 2017; then, in 2018, the fund dove 60.4 percent, followed by a 56.1 percent gain in 2019.

In other words, investors who would have bought into the fund in its early stages and still hold shares of it today would have seen gains to the tune of 1332 percent.

While Polychain’s journey is just one example, the tale of gains and losses told by the fund’s figures are not unusual when it comes to other crypto hedge funds.

Comparatively, leading hedge funds outside of the cryptocurrency world typically gain between 15 percent and 35 percent over their lifetimes.

For example, the Bloomberg All Hedge Fund Index, which tracks non-cryptocurrency hedge funds, shows how extreme the movements in crypto-based hedge funds can be: according to the Index, non-crypto hedge funds had overall returned losses of 5.9 percent in 2018, followed by 4.0 percent (2016), 9.2 percent (2017), and 9.0 percent (2019).