London-based Nickel Digital Asset Management (Nickel), Europe’s largest regulated digital assets hedge fund manager founded by senior traders and investment professionals formerly from major financial institutions including Goldman Sachs and JPMorgan, says the UK is one of the most attractive markets for hedge fund managers focusing on crypto and digital assets, as new research reveals 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 23 institutional investors and wealth managers in the UK who collectively oversee $66.5 billion in assets and who currently have some exposure to digital assets. The survey revealed that six of those interviewed expect to dramatically increase their exposure to cryptoassets between now and 2023, and another 11 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 16 of the 23 UK-based professional investors. This is followed by nine 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 the same number (nine) who said it was because of the improving regulatory environment.
However, the survey also identified several hurdles to investing into cryptoassets. Some 16 of the 23 UK based professional investors interviewed cited concerns about the relative size of the cryptoasset market and its liquidity as an issue, and the same number cited a lack of transparency in the market. Some 15 of the 23 UK based professional investors said concerns over custodial services for cryptoassets was a hurdle in terms of investing in the asset class, and 15 of those interviewed also said this about market volatility.
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 per cent in April and +2.6 per cent in May, in the face of Bitcoin dropping more than 40 per cent from April’s highs, taking H1 2021 performance to +12.6 per cent with a Sharpe of over 4, comfortably outperforming gains of 2.5 per cent for an average hedge fund in a closely watched HFRX Equity Market Neural Index, its closest market-neutral benchmark.
Anatoly Crachilov, CEO and Founding Partner of Nickel Digital, says:“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 UK. 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, says: “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, adds: “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.”
