Quant Hedge Fund Cambrian Launches Bitcoin, Ethereum Trusts

Offerings for institutional and accredited investors designed to cushion downside volatility.


Source: Shutterstock


key takeaways

  • The actively managed funds have a 4% management fee, while Grayscale’s passive bitcoin and Ethereum trusts have a 2% and 2.5% annual fee, respectively
  • Cambrian strategies over past three years have reduced downside volatility by two-thirds in the case of ETH and approximately 60% for BTC, executives say

Cambrian Asset Management has launched bitcoin and Ethereum trusts designed for institutional and accredited individual investors seeking exposure to the cryptocurrencies.

The California-based quantitative investment firm launched its newest products to satisfy the increasing demand for actively managed exposure to BTC and ETH in a way that cushions downside volatility, the company’s executives told Blockworks. The funds were also created to allow existing holders of bitcoin and ether to benefit from the firm’s risk management in a tax-efficient manner. 

“Our funds use a directional systematic investing approach that include momentum and mean reverting signals,” Cambrian President Tony Fenner-Leitao and CEO Martin Green said of the new products. “Our approach enables investors to get the compounding benefits of the space while limiting downside risks compared to what they’d experience from passive holding digital assets.”

David Tawil, president of ProChain Capital, said the products are unique due to their actively managed strategies in bitcoin and ether, noting that he doesn’t know of any other public, liquid offerings of their kind. 

“I think that systematic hedge funds are generally into crypto,” he told Blockworks. “However, I don’t know how many will create a liquid, public offering. That’s usually not their cup of tea.”

Cambrian Systematic Strategies, the firm’s flagship fund, is multi-asset — with roughly 50 tokens — has long and short positions, and charges a management and incentive fee. The two new trusts are single-asset (BTC or ETH), will not go short and will be charged a management fee only. 

Cambrian’s systems are informed by more than 100 billion historical market data points dating back to 2014 and utilize execution algorithms that update in milliseconds. Its strategies over the past three years have generated compound returns higher than a digital asset passive index and have reduced downside volatility by two-thirds in the case of ETH and approximately 60% for BTC.

The trusts require an initial minimum investment of $50,000 and carry a 4% management fee. Executives noted that the price represents a premium of between 1.5% and 2% compared to passive peers.

The Grayscale Bitcoin Trust (GBTC), a passive product with about $27 billion in assets, charges a 2% annual fee. The Grayscale Ethereum Trust (ETHE), which holds $9 billion in assets, has an annual fee of 2.5%. 

“Everything in crypto is expensive; eventually there will be fee compression,” Tawil said. “However, a 4% fixed fee, with no performance fee, for an active strategy in a nascent asset class is understandable. As always, the proof will be in the pudding.”

Grayscale has revealed plans to convert GBTC and ETHE to ETFs as about a dozen other proposed ETFs that would directly invest in cryptocurrencies await SEC approval.

Unlike an ETF that has no supply constraint, Cambrian intends to manage capital inflows to protect its return profile and relationship of the liquidity share and underlying net asset value.

Along with Institutional investors preferring active management and existing BTC and ETH holders, interested investors in the funds include crypto projects looking to grow their treasury holdings of BTC or ETH with reduced downside risk, Cambrian executives explained. 

Cambrian plans to file an application with OTC Markets to publicly trade shares of the trusts about a year after the first subscription.

“If we are successful in bringing the Trusts to the public markets,” Fenner-Leitao and Green said, “every retail investor, wealth management client or regulated institution will be able to get actively managed exposure by purchasing trust shares from their brokerage account.”

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