Ben Strack

Man Group is reportedly preparing to launch a crypto-focused hedge fund as the segment deals with the aftermath of the collapse of FTX and the ripple effects that continue to play out.&nbsp;



The London-based company has been developing the strategy in recent months, <a href="https://www.bloomberg.com/news/articles/2022-11-18/man-group-readies-crypto-hedge-fund-despite-ftx-chaos" target="_blank" rel="noreferrer noopener">Bloomberg reported</a>, citing people familiar with the matter.&nbsp;



Set to be led by portfolio manager <a href="https://www.man.com/andre-rzym" target="_blank" rel="noreferrer noopener">Andre Rzym</a>, the sources said, Man Group trading unit <a href="https://www.man.com/ahl" target="_blank" rel="noreferrer noopener">AHL</a> could look to launch the fund by the end of the year. Before joining Man AHL in 2005, Rzym worked at JPMorgan, where he traded emerging-market interest rate and credit default swaps.



A Man Group spokesperson declined to comment.



Man Group, which offers long-only, alternative and private markets products, managed $138.4 billion in assets across its investment managers, as of Sept. 30. The company is publicly traded on the London Stock Exchange. Its stock price, which is down 6.2% on the year, was up nearly 2% Friday.&nbsp;



The company’s reported plan comes to light after crypto exchange FTX <a href="https://blockworks.co/news/ftx-ceo-bankman-fried-resigns-bankruptcy-proceedings-begin" target="_blank" rel="noreferrer noopener">initiated bankruptcy proceedings</a> last week. Lawyers representing FTX and affiliates said in a bankruptcy <a href="https://pacer-documents.s3.amazonaws.com/33/188450/042120644082.pdf" target="_blank" rel="noreferrer noopener">motion</a> on Monday that as many as <a href="https://blockworks.co/news/ftx-doom-draws-dozens-of-federal-state-international-agencies" target="_blank" rel="noreferrer noopener">one million creditors could be named in the suit</a>.



Contagion is still taking shape. Crypto yield platform <a href="https://blockworks.co/news/blockfi-eyes-bankruptcy-as-ftx-fallout-continues-report" target="_blank" rel="noreferrer noopener">BlockFi is reportedly in danger of going bankrupt</a>, and the lending division of Genesis has halted <a href="https://blockworks.co/news/genesis-halts-lending" target="_blank" rel="noreferrer noopener">customer redemptions and new loan originations</a> — both developments just two of many ripples from FTX’s splash.



Between 25% and 40% of cryptocurrency-focused hedge funds had some level of direct exposure to FTX, or its native token, FTT, Crypto Fund Research said Monday.&nbsp;



The hedge funds’ exposure to the exchange has been on average between 7% and 12% of assets under management, according to the data provider.“



When the smoke clears, we expect the losses from crypto hedge funds and crypto venture funds directly exposed to the FTX collapse to have associated losses of well over $1 billion and possibly as much as $5 billion,” Crypto Fund Research CEO Josh Gnaizda told Blockworks.



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Hedge Funds

$138B Fund Manager Ready To Jump Into Crypto Carnage: Report

Jacquelyn Melinek

<div id="highlights-block_61e84449fab98" class="highlights">
 <ul>
 <li>Everybody is talking crypto in one form or another, Ellis said</li>
 <li>Firm’s analysts suggest bitcoin’s volatility is ‘less bubble behavior, and more the price discovery mechanism of a genuinely new asset class’</li>
 </ul>
 
</div>



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 <a href="https://cms.blockworks.co/which-mutual-funds-etfs-are-making-crypto-related-investments/" target="_blank" rel="noreferrer noopener">ETFs</a>, and so on. We’re not going to do something like that,” he added.&nbsp;



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. 



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“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.</blockquote>



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.&nbsp;



“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.&nbsp;



The company’s portfolio managers and an analyst did a deep dive <a href="https://www.man.com/maninstitute/bitcoins-place-in-multi-asset-portfolios" target="_blank" rel="noreferrer noopener">report</a> in December on whether crypto could be a useful diversifier in a multi-asset portfolio&nbsp;



“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.&nbsp;



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.&nbsp;



“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.&nbsp;



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



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