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One River Digital, a new institutional-focused investment firm, under the backing of tycoon and hedge fund manager Alan Howard is eyeing a $1 billion investment in cryptocurrencies by early next year.
On Wednesday, hedge fund One River Asset Management CEO Eric Peters explained to Bloomberg that the company’s offshoot One River Digital will surpass $1 billion in terms of crypto holdings sometime in early 2021. The newcomer has already made investments for institutional clients amounting to $600 million in Bitcoin (BTC) and Ether (ETH).
Besides supporting the investment fund, Alan Howard – also a co-founder of Brevan Howard Asset Management – will be purchasing a significant stake in the business. Market analysis, trading services, and technical support for One River Digital will come from Elwood Asset Management – another firm that Howard controls.
Coinbase will serve as the initial partner for One River Digital regarding trade execution and crypto custody, while Northern Trust will act as the fund’s administrator. Head of institutional trading at Coinbase Brett Tejpaul, stated via a spokesperson that:
“Our unified investing experience has the tools sophisticated investors need to execute large and complex trades, complemented by a diverse pool of liquidity.”
Another investor backing One River Digital is Ruffer LLP, the UK investment manager, that confirmed exposure to Bitcoin worth over $700 million. Evidently, that is nearly 2.5% of the firm’s total assets holdings under management being in bitcoin, as the rest of its portfolio investments are in Gold as well as inflation-linked bonds. Nonetheless, it was not clear whether Ruffer’s exposure allocation announcement was connected to its backing of the One River firm.
COVID-19 Pandemic as Main Catalyst for Bitcoin Surge
Over the last few months, a lot of institutional money has headed to Bitcoin. Institutions have been pushed closer to Bitcoin and other cryptocurrencies by unprecedented monetary-policy measures during the crisis period. Hence, the biggest boost for crypto assets emanated from the COVID-19 economic crisis.
“Covid-19 provided the ultimate catalyst for that transition. This is the most interesting macro trade I’ve seen in my career,” Peters commented.
The 54-year-old executive was attracted to digital assets due to their more volatility in financial markets. In his opinion, governments’ fiscal spending together with central banks’ debt monetization is turning out to be the main way to spur growth now that interest rates in the developed world are at below zero levels. Therefore, the money supply increase as a consequence, he thinks, will potentially lead to inflation and currency debasement.
Peters’ goal is to build a “blue-chip fiduciary” for institutional clients to risk exposure to various digital assets. Investors will be able to trade within a day through paying only a 1% fee charge for the funds. Currently, investors have headed towards Gold to escape inflationary fears and currency debasement challenges. However, Peters thinks the scenario will change soon, with BTC and ETH being more visible.
“There definitely are more risks to this than Gold, which has been around for thousands of years, but there’s also way more convexity. There are very few convex bets that’ll help your portfolio when these macro forces start playing out,” he said.
One River, a company Founded by Peters in 2013, usually makes money both when asset prices are rising and when falling through employing trend-following and volatility strategies. During the March coronavirus selloff, its Dynamic Convexity Fund and Long Volatility Fund surged and has since continued up to 40% and 33% year-to-date, respectively.