Hong Kong’s first regulated crypto asset fund for PIs aims for US$100 million


Arrano Capital has launched the first regulated Bitcoin fund for professional investors (PIs) in Hong Kong. CIO Avaneesh Acquilla told Asian Private Banker that the timing of the launch was fitting because of the volatility of bitcoin is becoming comparable to some traditional asset classes.

The crypto fund launched on Monday will track the price of Bitcoin and
provides PIs with access to Bitcoin through a traditional fund structure.
According to Acquilla, the fund aims to raise US$100 million in the first year
and the firm intends to launch a second cryptocurrency fund by the end of this year.

Same as with any other cryptocurrency investments, the fund provides
performance uncorrelated to traditional financial assets and a fund structure that is similar to traditional mutual funds. In addition, institutions prefer to invest within a regulated framework, therefore the approval from the Securities and Futures Commission (SFC) is likely to reinforce clients’ confidence.

Acquilla said that in the US, there was a strong institutional inflow to Bitcoin passive trackers last quarter. In Hong Kong, he has seen clear interest from institutions and family offices. He believed that the scarcity of the asset will provide support for the price since Bitcoin’s mining rewards will halve from next month.

“I think it is a good time to launch this fund. There is a major reduction in interest rates now and central banks are moving to QE again. And so, I do think that store value investments, such as gold and Bitcoin, are more in focus at the moment,” Acquilla shared.

“With traditional assets being quite volatile, we have seen Bitcoin volatility reach about the same as oil. We are seeing traditional assets with really high volatility and Bitcoin’s volatility is within the same historical range.”

Bitcoin as a tiny part of a balanced portfolio

While there are some supporting factors to enter the crypto market at this moment, Acquilla reminded that any Bitcoin investment should be accompanied by other traditional investments in a client portfolio, as the whole virtual asset market is only of US$200 billion.

“Although it is an incredibly interesting asset, it is volatile, at around five times the volatility of the S&P 500 on average for the past few years,” said Acquilla. “We do see the volatility of Bitcoin falling recently but still, it shouldn’t be more than one to two percent of a well-diversified portfolio.”

Arrano Capital is the blockchain arm of the Venture Smart Asia Limited (VSAL), an SFC Type 1, 4, 9 licensed firm based in Hong Kong, and will act as the offshore adviser of this fund.

VSAL is the first SFC-approved firm under additional terms for licensed portfolio managers with investments in virtual assets. This allows VSAL to hold up to 100% of its assets in crypto assets. Without such additional approval, asset management firms can only hold up to 10% of crypto assets in their overall asset portfolio.

VSAL provides private asset management services and institutional asset management services to institutional clients and individuals. The firm has formed a strategic alliance with Crosby, Bank of Singapore and LGT Bank as an external manager under its private asset management businesses.