Competition in the cryptocurrency managed investment market is heating up. Just weeks after Anti Hero Capital launched a cryptocurrency fund, the blockchain and cryptocurrency adviser DigitalX has announced the formation of a new division, DigitalX Investments, and launched DigitalX Fund.
DigitalX has hired Ellerston Capital portfolio manager Tim Davies to head its new funds management division.
The fund will invest predominantly in the leading cryptocurrencies, with a smaller allocation to special trading opportunities, including initial coin offerings. Permitted investments of the fund include cryptocurrencies, ICOs, derivatives of cryptocurrencies and managed investment schemes.
According to its information memorandum, the investment manager’s philosophy is based on the view that cryptocurrencies and ICOs are under-researched, given their relatively recent emergence.
“Given this and the belief that speculative financial markets often deviate away from fair value, the manager believes significant opportunities will present themselves in the cryptocurrency asset class, which the manager will be able to take advantage of.”
DigitalX says it has a competitive advantage in the ICO market due to its extensive experience in reviewing Blockchain protocols and digital assets, assessing teams bringing new cryptocurrencies to market and the value proposition of the underlying product.
Investors face some unusual risks. Digital currency transactions are irrevocable and stolen or incorrectly transferred coins may be irretrievable. Regulatory risk is such that it may become illegal in some jurisdictions in future to acquire, own or sell cryptocurrency.
The products are highly volatile and their liquidity is largely unknown.
The minimum initial investment is $50,000 and minimum additional investment is also $50,000.
Redemptions are monthly, with a minimum redemption amount of $25,000.
The buy-sell spread is 25 basis points. The management fee is 2 per cent and there is a performance fee of 20 per cent of the fund’s performance above benchmark (which is a 0 per cent hurdle).
The fund is licensed and administered by Boutique Capital, an authorised representative of Grange Capital Partners.
At Ellerston Davies ran a team of 20 analysts based in Shanghai, focusing on Chinese listed investments. Prior to that he was an associate director at Goldman Sachs.
It will have risk protection limits in place. No individual investment may exceed 20 per cent of fund assets, except Bitcoin or cash.
DigitalX managing director Leigh Travers says: “Cryptocurrencies are under-researched by mainstream asset managers and there is an opportunity to leverage our expertise in Blockchain technology and cryptoasset investment to create value for our clients.”
The cryptocurrency market took off in 2017, with market capitalisation growing from $18 billion to $610 billion and daily turnover growing from $162 million to $50 billion worldwide.
Currencies that appreciated strongly included Ripple, Ardor, NEM, Stellar, Dash, Ethereum, Golem, Binance Coin, Litecoin and OmiseGo.