Multimercados are diversifying their cryptographic portfolio; find out what funds have been raised from the market catastrophe

The growth of the cryptocurrency market has attracted the attention of managers dedicated to cryptocurrencies, but also the attention of hedge funds and wealth managers, who have already allocated a portion of their portfolio to these assets as an alternative to portfolio diversification.

One of Brazil’s largest asset managers, Verde Asset, announced in a January letter that the Green hedge fund, managed by well-known manager Luis Stuhlberger, had made a profit last year on cryptocurrencies. Green stated in the document that although he had a small portion of digital currency in his portfolio, he sees this as a diversification strategy.

Outside of that, millions of fund managers like George Soros and Paul Tudor Jones are investing in cryptocurrencies.

Despite the recent downturn in digital currency, legendary investor Ray Dalio, founder of Bridgewater Associates, one of the world’s largest asset managers, has once again called Bitcoin (BTC) “digital gold” and said it has a small percentage of its value. . in a crypto wallet in an interview with CNBC on May 24th.

In Brazil, Vitreo Manager invests in these assets not only in funds dedicated to cryptocurrencies, but also in other portfolios, such as a multi-market fund and a pension fund.

The Vitreo Superprevidência fund, for example, had a 1% exposure to its portfolio in cryptocurrencies. “The maximum I can lose is 1%, but I can multiply the profit from 4% to 7%,” says Rodrigo Knudsen, Vitreo’s manager.

According to Knudsen, the idea is to have a small allocation in cryptocurrencies as part of portfolio diversification, which includes allocations in other asset classes such as fixed income, credit, stocks, hedge funds, and foreign investment.

Allocation is made by investing in B3-listed cryptocurrencies (ETFs).

Vitreo itself has launched an ETF, CRPT11, and the main positions in its portfolio are Bitcoin and Ether (ETH), the two largest cryptocurrencies on the market in terms of capitalization.

In the case of the multi-market fund FOF Melhores Fundos, the allocation of cryptographic assets was 1.5% of the portfolio.

Manager Pandhora Investimentos has been investing in futures contracts traded abroad for more than a year, through the Pandhora Essential quantitative fund. The portfolio, which uses mathematical models to identify trends and build strategies, invests in 150 assets, including foreign exchange, stock markets and interest rates, both in the domestic market and in the foreign market.

The fund won both the Bitcoin Rally in 2021, when the cryptocurrency peaked at $ 69,000 in November, and the recent devaluation of its assets this year, with a short position in these contracts to support the decline of digital currency. “The fund has a small position in these assets, which accounts for 1% to 2% of portfolio risk,” says Tomás Leme, Pandhora’s investor relations manager.

wealth managers

Although Brazilian banks still have a shy presence in this market, most of them do not make recommendations to their clients for investments, the allocation of cryptocurrencies has also aroused the interest of wealth managers.

The Citrino Gestão family office, which manages the shareholdings of one of Brazil’s largest industrial groups, has invested in cryptocurrencies as part of its global multi-market fund strategy and is evaluating the design of a fund dedicated to this universe. says Marcelo Cabral, Managing Partner in Alternative Investment.

The allocation is part of portfolio diversification and Citrino holds the position of the fund in an Ethereum network ETF.

“We’re looking at the Citrinon issue, we have a person in charge of that. But it is an investment universe that seems to be unprofitable, starting now, and if you take that risk, you have a chance to significantly multiply the value, ”says Cabral.

Cabral says that in addition to portfolio diversification, one of the reasons managers look at this market is to be able to delve deeper into innovative technologies and projects that may be of interest to their clients. “We think strategically. All the concepts of decentralization [das transações] Web 3.0 [próxima fase da evolução da internet]they are the technologies of the future that we need to understand, ”he says.

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Introduction of institutional investors

Cabral believes that this market should gain even more volume after increasing the participation of institutional investors as the regulation of this market progresses.

One of the barriers to increasing institutional investor participation, Cabral believes, is the oversight of those assets. In the case of cryptocurrencies, the registration of transactions is done in a network block chain and each investor has an access key.

The problem can happen when an exchange fails, as in Netflix’s “Trust No One: The Hunt for the Cryptocurrency King” documentary, where the Canadian QuadrigaCX exchange failed and customers were left without access to their cryptocurrency.

Is cryptocurrency not related to other assets?

The recent decline in cryptography as part of the overall sale of risky assets in the face of rising US interest rates has challenged the thesis that performance was unrelated to other asset classes in the market.

UBS reported that Bitcoin and Ether showed a strong positive correlation (greater than 0.95) with the Nasdaq 100 index and the ARK ETF, which invests in technology innovation companies. That is, these assets tend to follow the same performance trend as technology stocks.

Read more:
It has become the mainstream: Bitcoin is losing its popularity as a protection against the fluctuations of the traditional market

“Bitcoins and other cryptocurrencies have not even acted as ‘digital gold’
or coverage inflation – because asset prices are rapidly deflating between high inflation and higher interest rates, ”the bank said in a May 17 report.

“With the entry of institutional investors into this cryptocurrency market, Bitcoin has a strong correlation with technology stocks and small hats [empresas de menor capitalização] The United States is experiencing further interest rate hikes, ”says Knudsen.

In practice, the allocation of cryptographic assets follows the behavior of variable income assets. It is therefore necessary to consider this position in conjunction with other more volatile assets, such as equities, so as not to increase the risk of the portfolio too much.

According to the Vitreo manager, this move somehow broke the paradigm that Bitcoin was considered a store of value. “In theory, that has changed. We had to review the correlations between the assets to build the portfolio in order to adjust the risk of the portfolio, ”says Knudsen.

Looking ahead, the manager says it is impossible to know whether this Bitcoin correlation should continue with the US stock market. “Bitcoin could return to $ 46,000, but the scenario isn’t there for that yet,” he says.

Cabral, of Citrine, believes that the correlation between the performance of other cryptocurrency risk assets at the time increased due to the high presence of some people and, like institutional investors, sold part of their asset allocation in the fall. markets to withdraw cash and rebalance the portfolio.

For Cabral, crypto-asset projects such as smart contracts, NFTs (digital transfer codes that guarantee authenticity to their owners) and Web 3.0 companies should be seen as developing market solutions.

“If a competitor develops a better solution, those projects will be lost or they will lose business,” he says. “That’s why our approach to these initiatives is like a fundraiser venture capitallooking for businesses in the early stages of high potential for value creation. ”

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