$140 Billion Asset-Management Firm Considers Launching Crypto Fund

key takeaways

Everybody is talking crypto in one form or another, Ellis said
Firm’s analysts suggest bitcoin’s volatility is ‘less bubble behavior, and more the price discovery mechanism of a genuinely new asset class’

Investment firm Man Group, which manages almost $140 billion in assets, is looking into creating a crypto fund for its clients, the CEO Luke Ellis said during Bloomberg’s The Year Ahead event.

“It’s something we’re considering,” he noted. “There’s an awful lot of ways of just sitting passively on crypto, you can just go buy the underlying, there’s all sorts of ETFs, and so on. We’re not going to do something like that,” he added.

Ellis sees “interesting opportunities” to apply its risk management skills and technology, like overseeing counterparty exposures, group-wide liquidity and balance sheet risk assessment, to provide a sort of risk-controlled version of crypto for its clients.

“For us, crypto is an interesting trading instrument, but I don’t take a case on either side of the sort of religion about whether it’s going to replace everything or disappear entirely,” Ellis said.

Although he doesn’t take a side, he does see it as a trading opportunity due to liquidity and other “interesting things to do from a trading point of view.”

The firm has decades of investment management experience across five global sectors: Man AHL, Man Numeric, Man GLG, Man FRM and Man GPM. It has a combined total funds under management of $139.5 billion, as of Sept. 30, 2021.

Some of the firms’ clients have been interested in gaining crypto exposure, as well, but have hesitations, he said.

“The institutional thing on crypto is everybody is talking about it in one form or another,” he commented. “[In] a lot of cases they’re really not sure if it does or doesn’t have a place in their asset management or asset allocation picture…It’s something they’re intrigued by but not taking into account yet,” he added.

The company’s portfolio managers and an analyst did a deep dive report in December on whether crypto could be a useful diversifier in a multi-asset portfolio

“In general, Bitcoin has been a great diversifier,” Man Solutions’ Portfolio Managers Ben Funnell and Teun Draaisma and Analyst Henry Neville wrote. “Its average absolute pairwise correlation with other asset classes is practically zero. But, in market stress environments, this benefit is greatly reduced. Where equities experience a 5% monthly drawdown, Bitcoin is also negative 86% of the time,” they wrote.

As there are risks, they wrote that it would be wise to err on the side of caution and allocate a small amount to crypto.

“Like Tyson Fury, it takes some enormous hits, but repeatedly seems to fight back with a resurgence that stuns its detractors,” they commented. “The fact that it has done this so often in a short space of time is at least initial evidence that Bitcoin’s volatility is less bubble behavior, and more the price discovery mechanism of a genuinely new asset class,” they added.

A Man Group spokesperson declined to comment when requested by Blockworks on Wednesday.

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