Stock-picking Vet Rolling Out Crypto Hedge Fund With Research-Heavy Approach

A veteran stock-picker is the latest traditional financier to give crypto a try. 

Duncan Simmons, who previously spent time at equity-focused Wall Street stalwarts Coatue Management and Iridian Asset Management, is entering capital-raising mode for his Aqxa Research, the founder and CEO told Blockworks exclusively.

Simmons’ first stop: the iConnections Digital Assets Forum in Miami next week, where institutional investors angling for crypto exposures will mingle with up-and-coming managers. The plan is to commence trading the new vehicle sometime this summer.

While Simmons’ fundraising aspirations are unknown, he’s already assembled a staff of five professionals with crypto experience — likely a bellwether of a substantial amount of day-one capital. The portfolio manager is in the process of finalizing service providers; he’s selected Goldman Sachs vet Ben Arnold’s Meraki Global Advisors to handle outsourced crypto trading.

Aqxa is fine-tuning a research-intensive approach to probing digital asset markets for alpha. 

The approach involves a two-tiered org chart consisting of analysts — who establish macro themes and “what the question is” — as well as so-called “community researchers,” initially a global network of contractors tasked with conducting research on the likes of Discord, Telegram, Twitter and, of course, by learning the nooks and crannies of the protocols themselves. 

The firm also plans to invest in early-stage tokens and is testing an on-chain analysis procedure that taps quantitative algorithms to determine asset weighting, based on volatility, trading volumes and related factors. Analysts with quant experience are tasked with rating either long or short bets on a one to five conviction scale, which feeds into how much of Aqxa’s overall book each position accounts for.

Higher-conviction, more surefire wagers, however, may be downgraded below more dubious prospects, depending on market conditions. 

Pulling the trigger on investments is done manually — not using algorithms — via Simmons’ bread and butter: discretionary, fundamental trades. 

Those investments, primarily, are made up of long and short plays in some of the most liquid cryptocurrencies — as well as dabbling in decentralized finance (DeFi). Simmons is also considering adding private venture capital- or private equity-style opportunities to the vehicle’s investment mix down the line. 

Simmons, who started investing personally in bitcoin in 2017, “floated the idea” of starting up a crypto trading business at a previous firm, but compliance and other back-office functions, as well as risk controls and tolerance, nixed the venture before it got off the ground. 

“I’m adopting the value-add research model that I was trained on,” he said. “It takes using deep, fundamental research, [as well as] engaging with management teams, developers, users and other stakeholders — actually using products ourselves, as well as doing the strategic analysis of how various projects fit into the ecosystem.”

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