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Crypto hedge fund Nickel Digital’s assets soar amid bitcoin volatility

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London-based crypto hedge fund Nickel Digital Asset Management has seen its assets soar some 260 per cent this year, as its range of cryptocurrency-focused strategies have generated gains throughout the sector’s rollercoaster ride.

The surge, which has brought the firm’s total AUM to more than USD250 million, has been fuelled by consistent positive returns across its four fund strategies, along with prudent risk management and a high-quality institutional team and business setup, the firm said this week.

Nickel Digital’s original flagship strategy, the Digital Asset Arbitrage Fund, now accounts for roughly a third of firm-wide AUM, having gained 12.6 per cent so far in 2021. The fund has scored some 96 per cent of positive months since inception in early 2019, with volatility of 3.5 per cent and Sharpe of 3.8. 

The fully systematic market-neutral arbitrage hedge fund utilises an array of trading strategies and approaches – including basis trades, triangular arbitrage, volatility arbitrage and calendar spreads – to profit from mispricing in bitcoin and other digital currencies.

Nickel Digital – which was launched in early 2019 by ex-Goldman Sachs and JP Morgan portfolio manager Anatoly Crachilov, former Bankers Trust trader Michael Hall, and ex-Macrosynergy Partners, Toscafund and Liongate PM Alek Kloda – also manages three other digital assets-focused funds.

The Diversified Alpha Fund – a non-directional, multi-strategy, multi-manager vehicle comprising a pool of hard-to-access and capacity-constrained strategies, including high-frequency market making, statistical arbitrage, relative value, volatility arbitrage, and trend following – has gained 14.6 per cent year-to-date.

The DeFi Liquid Venture Fund, which gained more than 30 per cent during August, looks to capture the growth potential in broader digital assets infrastructure outside bitcoin, targeting opportunities in protocols and decentralised finance. The Digital Gold Institutional Fund, meanwhile, is a long-only, buy-and-hold, directional bitcoin tracker.

The firm is also preparing new launches for the fourth quarter. The family of defensive funds, including defensive bitcoin and defensive ether funds, will offer institutional-grade exposure to bitcoin and ether, and use derivatives instruments to help curb downside volatility.

“This year has seen considerable volatility in the crypto market, but a growing number of professional investors tapping into the long-term growth opportunity in digital assets market and are increasingly looking for a degree of exposure to crypto,” said Nickel Digital CEO and co-founder Anatoly Crachilov.

“This, reinforced by our track record of delivering record performance at the times of market distress in April and May, has resulted in a strong growth of AUM.”

Henry Howell, head of business development, said the AUM growth stems from a global mix of family offices, endowments and wealth managers. 

“The global crypto market is now worth over USD2 trillion and growing at a rapid rate and as it becomes better regulated, has stronger infrastructure and greater innovation, professional investors will continue to increase their exposure to this market,” he added.

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