Shalini Nagarajan

Pension funds are reportedly backing a crypto broker that enables larger hedge fund bets on cryptocurrencies.



US aerospace and defense firm Lockheed Martin’s retirement plans are among supporters of the brokerage Hidden Road, the Financial Times reported on Wednesday, citing people familiar with the matter.



Established in 2018 by Marc Asch, who previously worked at Steve Cohen’s SAC Capital and Point72 Asset Management, Hidden Road initially concentrated on foreign-exchange offerings before venturing into the realm of digital assets.



The London-based firm is said to take its name from the Massachusetts street where Asch spent his formative years.



To manage risk, the firm uses a real-time system that sets trading limits and demands upfront collateral.



The FT <a href="https://www.ft.com/content/04090303-2b67-4567-82fc-cde5126bb85e">reported</a> that Hidden Road sees itself as more of a private equity outfit that raises external capital, rather than a traditional bank prime broker.



One investor reportedly characterized the firm as “prime brokering on steroids” and pointed out the risks associated with depending on external capital.



Hidden Road <a href="https://www.prnewswire.com/news-releases/hidden-road-raises-50-million-in-series-a-led-by-castle-island-ventures-301581877.html">secured $50 million</a> in funding in July last year from backers such as Citadel Securities and the investment units of FTX and Coinbase.&nbsp;



By the end of August, the broker was negotiating with leading global banks and hedge funds to assist with its crypto risk management.



Blockworks learned last year that Hidden Road faced trouble due to its involvement with FTX. Subsequently, all content was removed from its <a href="https://twitter.com/HiddenRoadHQ">X/ Twitter page</a>.



Hidden Road and Lockheed Martin didn’t return Blockworks’ request for comment by press time.



A crypto prime brokerage helps traders in the cryptocurrency market by providing them with leverage, similar to what traditional prime brokers do in stock markets. These brokerages extend credit to various clients like hedge funds to amplify their trading bets.&nbsp;



If a client incurs heavy losses, the prime brokerage or its investors may have to cover the losses.



The interest from Lockheed Martin&#8217;s retirement plan, along with others, signifies the most recent indirect foray into cryptocurrencies by pension funds looking to enhance their returns.



Nonetheless, some pension funds&#8217; foray into crypto has not exactly been smooth. Last year, two Canadian pension funds, Ontario Teachers&#8217; Pension Plan and CDPQ, <a href="https://blockworks.co/news/ontario-teachers-fund-sank-95m-in-failed-ftx-empire">experienced losses</a> in their investments with FTX and Celsius.



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Crypto broker Hidden Road finds financial allies in pension funds: report

<div id="highlights-block_63204cb30d3db" class="highlights">
 <ul>
 <li>Fidelity has long supported crypto trading and custody for institutional clients</li>
 <li>The move would open more than 34 million brokerage accounts to bitcoin</li>
 </ul>
 
</div>



Fidelity Investments’ retail customers could soon have the option to trade bitcoin directly through the brokerage platform.



The <a href="https://www.wsj.com/articles/fidelity-weighs-bitcoin-trading-on-brokerage-platform-11663008698" target="_blank" rel="noreferrer noopener">Wall Street Journal</a> reported on Monday that the top retirement planner is evaluating how to integrate bitcoin with its 34.4 million brokerage accounts, which would mark one of the largest crypto integrations at a major traditional financial institution to date.



Since 2018, Fidelity has operated a crypto trading <a href="https://www.cnbc.com/2018/10/15/fidelity-launches-trade-execution-and-custody-for-cryptocurrencies.html" target="_blank" rel="noreferrer noopener">business</a> for institutional clients, including hedge funds. In 2020, it <a href="https://www.sec.gov/Archives/edgar/data/1822414/000182241420000001/xslFormDX01/primary_doc.xml" target="_blank" rel="noreferrer noopener">launched</a> a crypto fund called the Wise Origin Bitcoin Index for affluent investors. As of May, the fund had <a href="https://www.sec.gov/Archives/edgar/data/1822414/000182241422000001/xslFormDX01/primary_doc.xml" target="_blank" rel="noreferrer noopener">689</a> investors.&nbsp;



The move hasn’t yet been officially confirmed by the company. “While we have nothing new to announce, expanding our offerings to enable broader access to digital assets remains an area of focus,” a Fidelity spokesperson told Blockworks in an email.



For what it’s worth, Galaxy Digital CEO Mike Novogratz <a href="https://twitter.com/akashpasricha/status/1569335995430215684" target="_blank" rel="noreferrer noopener">said</a> during the SALT Conference on Monday: “A bird told me Fidelity is going to shift their retail customers into crypto soon enough.”



The Boston-based finance giant is the largest US retirement-plan provider, providing employee benefit programs for nearly 23,000 companies. Fidelity is set to be the first of its kind to open 401(k) accounts to bitcoin, giving employers the option to decide whether staff can hold the crypto in their retirement plans, once the program goes live this fall.



One analyst told Blockworks in an email that cryptoassets are a good way to fight inflation, but may not be the best plan for retirement.



“Bitcoin is an investment like shares; it can’t be a retirement plan, one must trade and take profits, not just stake your stack,” said Aarti Dhapte, senior research analyst at Market Research Future.



Dave Gray, Fidelity&#8217;s head of workplace retirement offerings, told the Journal there was a need for a diverse set of products and investment solutions.



That move drew attention of the US Department of Justice, which said it had “<a href="https://www.wsj.com/articles/labor-department-criticizes-fidelitys-plan-to-put-bitcoin-on-401-k-menu-11651197309?page=1" target="_blank" rel="noreferrer noopener">grave concerns</a>” for retirement savers adopting bitcoin. And Fidelity’s competitors haven&#8217;t been too keen on doing the same. Spokespeople for both Vanguard and T. Rowe Price earlier <a href="https://cms.blockworks.co/will-competitors-follow-fidelitys-lead-in-401k-bitcoin-offering/" target="_blank" rel="noreferrer noopener">told Blockworks</a> they had no plans to offer similar investment offerings.



Fidelity’s move into cryptocurrencies wasn’t a pandemic-born interest, unlike many other institutions. CEO Abigail Johnson reportedly held internal meetings about crypto and blockchain technology about a decade ago, and the firm eventually started mining bitcoin in <a href="https://www.fidelity.com/crypto/overview" target="_blank" rel="noreferrer noopener">2014</a>, according to its website. 



This article was updated at 8:50 am ET to include Fidelity&#8217;s response.



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