Proprietary Crypto Trading Firm Taking on Investors For First Time

key takeaways

The firm’s flagship strategy gained 50.8% last year, with less volatility than bitcoin
Marketing efforts are mostly centered on high-net-worth individuals and family offices

Katonah EvE, a crypto proprietary trading firm, is laying the groundwork for its first fund open to outside investors on the heels of solid risk-adjusted performance.

The launch comes as a growing number of portfolio managers are rolling out new products, hoping to capitalize on swelling institutional interest in actively managed crypto strategies.

In a fundraising note to institutional investors, including family offices, obtained by Blockworks, the firm said it’s soliciting potential seeders for the strategy.

“There are a variety of structures that we are weighing and investor demand will dictate the final direction,” the firm wrote, adding that capacity would initially be limited.

Emil van Essen, the firm’s chief investment officer, confirmed to Blockworks that Katonah is preparing to open up to outside capital. The new fund would likely launch in three to six months, he said. Strategies could also be offered in separately managed accounts.

Van Essen currently primarily trades bitcoin CME futures, options and spreads and is planning to expand into ether products soon. He also has some expertise trading spot crypto. The new fund would likely take a diversified approach that offers spot exposures coupled with derivative plays.

The largely quantitative strategy now, van Essen said, is designed to capture upswings in the crypto market while providing strong downside protection.

“When the market’s 40% down, we want to be down 5%,” he said. “Generally, we’re always in if it’s going to the moon. And if it’s going down dramatically, we’re out.”

The approach gained 50.8% last year, according to a tearsheet obtained by Blockworks. Since the strategy’s July 2021 inception, Van Essen is up 142.5%, compared to bitcoin’s 377% gain over the same period.

Katonah, however, notched the return with much lower volatility. Its maximum drawdown was -12.4%; bitcoin’s was -40.5%. And the strategy recorded an average standard deviation of 36.4%, compared to bitcoin’s 80.1%.

The new fund will impose a minimum investment of $500,000. It will charge a 1% management fee and take a 25% cut of profits.

Katonah has nearly $300 million of assets under management overall, with the majority allocated to traditional finance strategies.

The firm formed in August last year, when Katonah Capital merged with Emil van Essen. Before founding his eponymously named firm, van Essen worked as one of the first quantitative traders for the Bank of Montreal.

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