Ivy League institution Yale University is investing in Paradigm, a cryptocurrency hedge fund founded by Coinbase co-founder Fred Ehrsam, former Sequoia Capital partner Matt Huang, and Pantera Capital veteran Charles Noyes. Yale’s endowment is the second-largest in higher education and is run by David Swenson, a world-class investment manager that began Yale’s endowment with a “meager” $1 billion.
A Big Move North
- 1 A Big Move North
- 2 Schools and Crypto Need to Hook Up
- 3 This Will Lead to Further Success
- 4 Slow and Steady Wins the Race
Hedge fund giant turned crypto enthusiast Mike Novogratz broke the news on Twitter, writing:
“This is really big news. David Swenson is the most influential investor in the world. By making this investment, he just said that bitcoin is a store of value. He’s the alpha bull of the herd.”
Paradigm has now raised a whopping $400 million, and shares the limelight with such ventures as Pantera, Polychain Capital and Andreesen Horowitz as one of the largest investment funds devoted to the cryptocurrency space.
In addition, it is being reported that Swenson also invested money in Andreesen Horowitz’s cryptocurrency fund – which currently exceeds $300 million – back in June. The firm later explained:
“We have an ‘all weather’ fund. We plan to invest consistently over time, regardless of market conditions. If there is another ‘crypto winter,’ we’ll keep investing aggressively.”
Schools and Crypto Need to Hook Up
Yale’s endowment stands at just shy of $30 billion, of which roughly 60 percent is devoted to “alternative investments” such as cryptocurrencies. The university has also managed to return a rough average of about 7.5 percent, beating the average university endowment return by approximately two percent.
John Lore – founder of the Capital Fund Law group – suggested earlier this year that educational institutions should start investing in cryptocurrency ventures on a “limited basis for strategic reasons,” and it appears Yale is taking this advice to heart. At press time, it’s unclear how much money Yale offered to Paradigm and Andreesen Horowitz; in fact, the news hasn’t even been confirmed publicly.
This Will Lead to Further Success
However, Ari Paul – chief investment officer at BlockTower Capital – says the amounts of money offered aren’t going to matter. He states that since Yale has gotten the ball rolling, other endowments are likely to follow suit, and he’s certain more schools will be entering the cryptocurrency space:
“We’re in a bear market until new buyers are enticed. Even a small dollar amount is legitimizing. If that happens, every family office says, ‘Oh, Yale’s in. that gives us the excuse.’”
He goes on to say that the day bitcoin and cryptocurrency-based hedge funds become fully legitimate will be when people trust enough to pour their retirement savings and pension funds into them, though he admits this isn’t likely to happen for some time, the biggest reason being the small amount of regulated cryptocurrency custodians among respected Wall Street figures.
However, it has been reported that roughly three of the world’s largest banks – Goldman Sachs, Morgan Stanley and Citigroup – have either started or completed plans for various custody products for cryptocurrencies.
Slow and Steady Wins the Race
Also, Bakkt – the digital currency trading platform established by the Intercontinental Exchange (ICE) – is set to make its official debut next month and will offer physical warehousing for bitcoin. This will allow institutions to trade in bitcoin and cryptocurrencies through a regulated environment under the lens of one of the world’s largest exchange operators.
Swenson has been managing Yale’s endowment for 33 years. His success with the school is unprecedented and has caught the eye of neighboring Ivy League institutions such as Princeton, Harvard, MIT and the University of Pennsylvania, all of which have adopted his investment strategies.