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 Middle East one of its top priority markets. 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 20 institutional investors and wealth managers in the UAE who collectively oversee $41 billion in assets and who currently have some exposure to digital assets. The survey revealed that 10 of those interviewed expect to dramatically increase their exposure to cryptoassets between now and 2023, and the other 10 said they will also add to the 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 12 of the 20 UAE-based professional investors. This is followed by nine who said it is because of the improving regulatory environment, and the same number who said it is recent evolution of the sector and a larger liquidity pool offered greater comfort and confidence in building exposure to this new asset class.
However, the survey has also identified several hurdles to investing into cryptoassets. Some 18 of the 20 UAE based professional investors cited the lagging global regulatory clarity as a hurdle. This was followed by 17 highlighted concerns about security of digital assets, and the same number cited relative size of the cryptoasset market and its liquidity.
Despite recent corrections in crypto market, Nickel Digital’s funds have delivered strong performance. For example, its flagship Digital Asset Arbitrage Fund protected investors’ capital and posted record returns in April and May, the months of intense selloff in bitcoin market, extending year-to-date net gains to double digit figures.
The fund was up +4.1% in April and +2.6% in May, in the face of Bitcoin loosing over -40% from April’s highs.
The fund has delivered 96% of positive monthly returns since its inception 25 months ago, while maintaining industry-leading Sharpe of 4.5. It has delivered a year-to-date net return of 12.6% over the first 6 months of the year, comfortably outperforming gain 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.
The fund is now up 18.9% on the rolling 12-month basis, well above Nickel’s own conservative return guidance of 8-10% pa.
The fund pursues an absolute return strategy without expressing directionality views on the underlying crypto market. Instead, it exploits market inefficiencies, price dislocations, and harnesses swings of volatility in the crypto market to deliver consistent positive returns within a strictly defined risk management framework.
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 family offices based in UAE, as well as across Middle East. 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 Digital’s infrastructure is designed to offer various access points to the crypto market
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.
© Press Release 2021
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