Elwood Asset Management, an asset management firm owned by British billionaire Alan Howard, who is also the founder of Brevan Howard, is eyeing a $1 billion venture into the crypto hedge fund sector, reported the Financial Times on Aug. 30.
The asset management firm is developing a platform that allows institutional investors to cherry-pick custom-made portfolios of cryptocurrency funds.
The new platform could have $1 billion under management
The new platform is expecting to eventually have $1 billion in assets under management (AUM). According to the Financial Times, Elwood’s decision to navigate through the new investment landscape is guided by the knowledge that a number of crypto investment vehicles still fall short from having the traditional features that have shaped the traditional hedge fund industry.
Joint research conducted by the asset manager in partnership with auditing and consulting firm PricwaterhouseCoopers (PwC) in 2019 revealed that crypto hedge funds charge a management fee of 1.72 percent plus a separate performance fee of 23.5 percent while the traditional hedge fund industry charges 1.41 percent and 16.6 percent respective averages.
The new platform would look to capitalize on the difference in fees. Elwood will charge its own fee on top of the fees that investors have to fork out to access the underlying funds.
Speaking to the Financial Times, Elwood CEO Bin Ren sees this as a very big opportunity for the company to grow as they want the product to manage over $1 billion in assets.
“I see this as a very big growth opportunity,” he said.
The asset manager has been on the offensive to lure institutional investors into the cryptocurrency industry. Bloomberg reported in March that the British digital asset manager launched a blockchain exchange-traded fund (EFT) in partnership with Invesco.
At the time, Ren said the only way for institutional investors to get into crypto is for them to buy bitcoin but have been hesitant or unable to buy the leading digital asset.
“An ETF gives a highly liquid and regulated way to gain exposure. This is the right point to start,” Ren stated.
Howard puts his money where his mouth is and has made investments in Block.one, a Cayman Islands that behind EOS.io, one of the most successful startups in the crypto space judging by the amount of money raised in an initial coin offering.
The British billionaire has also invested in Bakkt, a crypto startup owned by the Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange (NYSE).
Navigating the treacherous crypto space
Elwood’s platform would design portfolios for institutional crypto investors by helping them to navigate through the industry’s murky waters by steering them into the direction of vetted crypto projects that have passed robust due diligence.
This will avert the risk, limiting the exposure for investors in the emerging sector. One that has seen its fair share of bad actors already.
Ren, a former chief investment officer at Brevan Howard’s Systematic Investment Group, said that the asset management company has identified 50 crypto hedge funds that have satisfied their due diligence.
The details of the final product are still sketchy but it is known that investors will be required to enter their intended risk, liquidity amount, and returns and then receive a custom portfolio.
Elwood partnered with Invesco Japan with the intention of exposing Japanese investors to cryptocurrency products.“We are very excited to be partnering with Invesco Japan to offer Japanese investors exposure to blockchain technology.
In Japan there are currently very few investment offerings which provide access to the opportunity presented by blockchain, perhaps due to the fact that its application has been typically thought of in the narrowest of terms and predominantly linked to cryptocurrencies,” said Ren in a press statement.