New Crypto Fund of Funds May ‘Buy the Dip at Scale,’ Sources Say
The London fund of funds, led by a former Ardian professional, plans to launch in the first quarter of 2023
A private equity professional, helming a new crypto fund of funds, appears to be gaining fundraising traction as investors hunt for opportunistic strategies primed for uncommonly volatile markets, according to three sources familiar with the matter.
Managing Partner Joshua Manasseh previously spent more than six years at private equity firm Ardian. Manasseh’s London-based Arbury Advisors plans to launch in the first quarter of 2023.
It’s unclear how much capital Arbury intends to raise, but sources said the fund of funds has landed the family office of an unidentified major private equity player as an anchor investor.
Manasseh tapped crypto veteran Joseph Cox as head of research. The New York-based Cox, formerly chief operating officer of a $100 million-plus asset manager, is tasked with bridging the US and Europe and assisting in capital deployment, as well as due diligence.
Following FTX’s blowup, scores of blue-chip traders lost billions of dollars in days. The downturn, though, has triggered an impetus among limited partners to back opportunistic-minded investors — including long-biased, long-only and distressed strategies — in a bid to “buy the dip at scale,” one source said.
Contrary to the industry line, sources said it may be a good time to launch. One said it’s “refreshing” for Arbury to not have to buy into the bull market. Even so, it’s no simple task to ink commitments from investors who actually have dry powder left and have not been dissuaded from the market’s plunge.
Due diligence and risk are now paramount.
“Alpha is not that hard to come by when markets pick up, but it’s really the operational and risk [due diligence] that makes the difference,” one source said.
Manasseh declined to comment. Sources were granted anonymity to discuss sensitive business dealings.
But raising capital is continuing apace — with one source saying things seem to be “falling into place” after Arbury secured its private equity anchor. In the swiftly-changing asset class, limited partners who are less savvy on crypto due diligence take cues from more grizzled peers.
The Arbury pitch
The company is slated to deploy to 10 to 15 funds, both illiquid venture — including buyers of early stage, private token sales and debt, as well as pure-play equity — and liquid hedge structures, such as market-neutral.
The private equity-style, close-ended vehicle plans to deploy capital over a two-year period. Manasseh plans to write larger checks to established traders under the aim of allocating about 25% of his book every six months.
There’s an optional fund extension at the discretion of its backers. And performance fees only come into play after investors receive a 1.5x multiple and an 8% net internal rate of return, or hurdle.
Manasseh previously worked on the investment team at Ardian — which now has more than $140 billion in assets under management — and played a role in more than $8 billion of secondary fund of funds transactions. Cox is also an adviser to GoQuant.
There’s an emphasis on risk and diversification, including writing smaller checks to emerging traders, while reserving capacity to ramp up over time, as proven by performance.
The startup has also been working to negotiate discounted fees from the vehicles it’s considering backing. Lowered fees are “especially attractive” to would-be investors given market conditions and uncertainty, one source said.
On the due diligence front, Arbury has tapped Quentin Thom and James Newman’s perfORM. That operation, also based in London, has been capturing a growing slice of the market for deep dives on both digital asset investment firms and their service providers.
Manasseh has already deployed proprietary capital to at least one unidentified manager, which could be backed, in turn, by the fund of funds. And Thom and Newman are now assisting with due diligence on an up-and-coming pipeline of potential managers. The firm plans to predominantly employ a traditional fund of funds model, though Manasseh and Cox would selectively consider separately managed accounts.
Arbury has also inked a partnership with Cloudwall — a risk management startup founded by one-time Morgan Stanley executives — which facilitates “stress-tests” of portfolios against live and historical blockchain data.
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