London-based Nickel Digital Asset Management (Nickel), Europe’s largest regulated and award-winning digital assets hedge fund manager founded by senior traders and investment professionals formerly from major financial institutions including Goldman Sachs and JPMorgan, has announced plans to make the US one of its top priority markets, as new research reveals the potential for strong growth in the country. Nickel’s clients include institutional investors, global wealth managers and ultra-high net worth individuals from around the world.
Nickel Digital recently commissioned a survey with 40 institutional investors and wealth managers in the US who collectively oversee $112 billion in assets and who currently have some exposure to digital assets. The survey revealed that 24 of those interviewed expect to dramatically increase their exposure to cryptoassets between now and 2023, and another 10 who said they will also add to their exposure.
The three main reasons given for greater allocation to digital assets is the structural long-term capital appreciation prospects of cryptoassets – the view cited by 24 of the 40 US-based professional investors. This is followed by 17 who said having some exposure to cryptoassets, they have become more comfortable and confident in how the asset class works and the infrastructure around it, and 15 who said it was because of the improving regulatory environment.
However, the survey has also identified several hurdles to investing into cryptoassets. Some 34 of the 40 US based professional investors cited concerns over the quality of custodial services as a hurdle. This was followed by 33 who highlighted concerns about the relative size of the cryptoasset market and its liquidity and 32 who cited the lack of reputable fund managers offering investments in this area.
Nickel Digital’s funds have delivered strong performance despite recent crypto market corrections with its flagship Digital Asset Arbitrage Fund posting record returns in April and May, the months of intense selloff in the Bitcoin market. The fund was up +4.1% in April and +2.6% in May, in the face of Bitcoin dropping more than 40% from April’s highs, taking H1 2021 performance to +12.6% with a Sharpe of over 4, comfortably outperforming gains of 2.5% for an average hedge fund in a closely watched HFRX Equity Market Neural Index (www.hfr.com/family-indices/hfrx, its closest market-neutral benchmark.
Anatoly Crachilov, CEO and Founding Partner of Nickel Digital, commented:
“Despite the recent correction in the crypto market, our survey confirms there is an ever-increasing appetite for this asset class among professional investors, willing to take constructive longer-term view on this asset class.”
“We are glad to see increasing adoption of digital assets by many professional investors in the US. We would be honoured to help forward-looking investors understand and navigate this nascent market by sharing our multiyear financial experience, originated in major Wall Street banks and now successfully applied to crypto ecosystem over the last few years.”
Fiona King, Nickel’s Head of Institutional Sales said:
“We are looking to address many of the concerns investors might have, not least the high volatility of crypto market. To that end, the recent performance of our market-neutral arbitrage fund demonstrated its ability to protect capital, as well as to deliver consistent and repeatable returns during turbulent times, such as April and May 2021.”
Henry Howell, Nickel’s Head of Business Development added:
“Security of clients’ assets is paramount at Nickel. We deploy independent institutional-grade custody models in partnership with US-based Fidelity and UK-based Copper. using a range of sophisticated cryptographic solutions, including distributed private keys and MPC (multi-party computation) vaults. The approach is based on air-gapped, multi-signature, cross-organisation setup, thus mitigating a “single point of failure”, typically associated with self-custody of crypto assets. In our setup, the join control over fund assets is retained by independent fund administrator and fund custodian at all times.”
Nickel currently has four funds investing in the digital asset space. Its market-neutral Digital Asset Arbitrage Fund pursues an absolute return strategy without expressing directional views on the underlying cryptoassets market. It exploits market inefficiencies and price dislocations, and harnesses swings of volatility to deliver consistent positive returns within a strictly defined risk management framework. The fund delivered over 95% of positive months since inception two years ago, with volatility of 3.5% and Sharpe of over 4.
Diversified Alpha (Digital Factors) Fund is a non-directional multi-strategy fund which wraps a portfolio of attractive but hard-to-access and capacity-constrained strategies into a single, investible fund. Among the strategies it deploys are high-frequency market making, statistical arbitrage, relative value, volatility arbitrage, and trend following. The fund protected capital well in May, delivering a record monthly performance of +4.7% despite the underlying market going through one of the strongest corrections in recent years.
DeFi Liquid Venture Fund is designed to capture the growth potential of the broader digital assets space outside Bitcoin, spotting early winners in Layer 1 protocols and Decentralised Finance, the area of greatest financial innovation. The fund is an actively managed research-driven vehicle aiming at identifying early winners and capturing structural expansion of this space.
Nickel’s Digital Gold Institutional Fund, a Bitcoin tracker, provides secure, efficient, transparent, and liquid access to physically allocated Bitcoin. It delivers institutional-grade precision of trade execution available 7 days a week with one of the industry’s lowest expense ratios.
The family of defensive funds, including Defensive Bitcoin and Defensive Ethereum funds, to be launched in September, aims to offer institutional-grade exposure to Bitcoin and Ether while managing downside volatility of such portfolios. Nickel will apply an overlay of derivative instruments aiming to reduce drawdown of these portfolio, while capturing majority of the upside.
- Nickel Digital commissioned the market research company Pureprofile to interview 40 wealth managers and institutional investors in the USA. The survey was conducted online in May and June 2021.
About Nickel Digital Asset Management
Nickel Digital Asset Management (www.nickel.digital) is a London-based FCA authorised and regulated investment manager that offers a range of digital asset strategy solutions for institutional investors. Its mission is to provide a gateway for traditional investors into the digital assets market across a broad range of risk profiles.
The firm deploys highly sophisticated low-latency algorithmic trading, pursuing a range of arbitrage strategies in both spot and derivative markets, as well as directional solutions, aiming to capture structural expansion of digital assets market.
Nickel is led by a senior team of traders and investment professionals of experience gained in major Wall Street banks, such as Bankers Trust, Goldman Sachs, JPMorgan, Morgan Stanley, BofA Merrill Lynch, Rothschild, and Credit Suisse, as well as global hedge funds, including DE Shaw, Tudor, Eisler Capital, and Cheyne Capital.