Elwood Asset Management — owned by British billionaire and Brevan Howard founder Alan Howard — is planning a $1 billion venture into the crypto hedge fund space.
The Financial Times (FT) reported on Aug. 30 that the asset manager is developing a platform that would tailor portfolios of cryptocurrency funds for institutional investors.
Weeding out the crypto hedge fund space
Elwood Asset Management CEO Bin Ren told the FT that the venture will aim to steer investors towards a selection of vetted crypto funds that have passed robust due diligence so that market participants can avoid the risks associated with the emerging sector.
Ren — who formerly served as chief investment officer at Brevan Howard’s Systematic Investment Group — said that screening of the sector had resulted in Elwood identifying up to 50 crypto hedge funds as “probably satisfy our due diligence.”
While details of the product remain to be finalized, the new fund could enable investors to determine input factors such as the level of risk they are willing to court, their expectations of returns, as well as liquidity terms. It will also measure the potential correlation of the tailored crypto hedge fund portfolio with the rest of their existing assets.
As the FT notes, Elwood’s bid to navigate institutional clients through the new investment landscape is informed by a recognition that many crypto investment vehicles still lack the traditional features of the traditional hedge fund industry.
Product could eventually have $1bn AUM
The report cites research jointly conducted by Elwood and Big Four auditor PriceWaterHouseCoopers this year that revealed that crypto hedge funds charge an average management fee of 1.72% plus a performance fee of 23.5% — well above the 1.41% 16.6% respective averages for the traditional hedge fund industry.
For its services, Elwood will apply its own fee on top of the fees that investors pay to access the underlying funds.
“I see this as a very big growth opportunity,” he told the FT, noting he expects the product could eventually manage over $1 billion in assets.
This March, Elwood had indicated it was planning to increase its cryptocurrency offerings as it announced the launch of a blockchain exchange-traded fund in partnership with Invesco.
Howard himself has a host of crypto investments under his belt, including in EOS developer Block.one and the ICE-owned digital assets platform Bakkt.