Michael Bodley

Old Street Digital, a London crypto asset manager that has quietly assembled a team chock full of deeply credentialed investment veterans, has hit a snag: raising the kind of institutional capital its traders are used to trading.&nbsp;



Old Street Digital (OSD) has less than $10 million of assets under management — a drop in the financial bucket from what OSD Chief Investment Officer Gary Clarke handled at <a href="https://blockworks.co/tag/blackrock" target="_blank" rel="noreferrer noopener">BlackRock</a>, where he headed up the traditional finance giant’s global equity team.&nbsp;



From 2014 to 2016, according to Clarke’s LinkedIn, he oversaw a team of US and United Kingdom portfolio managers running more than $30 billion at BlackRock — otherwise known as the world’s largest asset manager.&nbsp;



Old Street has been pushing to raise the kind of external money its team is accustomed to, according to two sources familiar with the matter, confidential firm marketing materials obtained by Blockworks and United Kingdom FCA regulatory records.&nbsp;



Read more: <a href="https://blockworks.co/news/uk-tougher-on-crypto-companies">UK Denies Crypto Companies the US Lets Operate</a>



Even as digital asset markets have stabilized and bounced back from near historic lows in the fourth quarter of 2022, that effort evidently hasn’t been easy.&nbsp;



The firm’s latest pivot: recently tapping perFORM Due Diligence of London to conduct a review of its operations and trading functions. Run by Quentin Thom and James Newman, perFORM, started out as a traditional finance due diligence firm. But it’s since expanded into conducting reviews of crypto service providers and funds.&nbsp;&nbsp;



In an exclusive interview with Blockworks, Old Street Chief Executive Officer Paul Ridley said the crypto industry is “still in the super early days” when it comes to the level of limited partner dry powder that has fueled the rise of traditional finance fund managers for decades.&nbsp;



The core team Ridley works with at Old Street are all used to trading or overseeing the back and middle-office operations of a slew of strategies deploying north of $1 billion, Ridley said. The Old Street head’s resume includes stints at investment bank Nomura and Boston Consulting Group, and he has personal experience in the crypto sector.&nbsp;



And Chief Operating Officer Nic Basson joined the firm after spending nearly four years at alternatives giant Invesco, where he worked in senior roles focusing on emerging markets, including retail products, according to his LinkedIn.&nbsp;&nbsp;



“We’ve all had to adjust our definition of small,” Ridley told Blockworks.&nbsp;



He declined to comment on investor communications and the marketing materials obtained by Blockworks, citing regulatory restrictions in the United Kingdom.



<h2 class="wp-block-heading">Top backers, not top capital&nbsp;</h2>



Old Street, named for the historic mile stretch of London that has been a hotbed of hedge fund traders and their courting service providers for as long as anyone in the city’s traditional finance scene can remember, has no shortage of brand name backers behind it.&nbsp;



It’s the kind of firm that doesn’t need publicity and doesn’t seek it out. It’s the kind of firm that shouldn’t have this tough of a time raising serious dollars and pounds from pension advisors, top family offices and endowments.



Ten million dollars under management these days is no small sum for upstart crypto funds looking to take on the industry’s deep rooted native players — the likes of Pantera Capital and maybe even Grayscale Investments or Galaxy Digital one day.&nbsp;



Ridley’s team locked down a $2.8 million seed round in August 2022 led by Draper Associates, according to a <a href="https://www.prnewswire.co.uk/news-releases/old-street-digital-announces-2-8m-seed-funding-round-led-by-draper-associates-876490141.html" target="_blank" rel="noreferrer noopener">statement</a> from the time. It included participating investors like Plassa Capital, plus “prominent venture capital and angel investors across Europe, Asia and the U.S. as well as senior executives from the U.K. Asset Management industry,” the statement said.



Tim Draper, the near household name venture capitalist who founded Draper Associates, then said in the statement that Old Street’s team brought a “unique approach” that “applies traditional fund-management expertise to the world of crypto.”



That approach has yet to fully mesh, at least when measured by outside limited partner capital raised so far. But Ridley told Blockworks he and his team are playing the long game in an industry that has been beset by a lack of traditional finance understanding and regulatory hurdle after hurdle.&nbsp;



“What we wanted to do was take a bunch of traditional finance asset management [types], bring them together and try to build a really reputational product that would be the sort of thing that BlackRock would build, that T Rowe [Price] would build,” he said. “The kind of really clear, focused product which is the kind of thing institutions should be buying — pension funds, endowments, sovereign wealth funds.”



Asked the difference between an institutional investor in traditional finance and an institutional investor in digital assets, Ridley said that his London financial circle “have been talking about exactly that” on and off in 2023.



“No one knows what a real institutional investor is in this space — still,” he said.&nbsp;



<h2 class="wp-block-heading">Stablecoin yield for TradFi types</h2>



That said, the team has operational capital from its $2.8 million seed round, and Ridley is projecting patience in terms of really getting things going.&nbsp;



One of Old Street’s core strategies, which it dubs in investor marketing materials as the “Old Street Digital Crypto Cash Management Solution,” had delivered a gross annualized return of 11.7% from its inception in the fourth quarter of 2022 through the end of February.&nbsp;



It targets an 8 to 15% annual return, per the same materials, by following a strategy that makes stablecoin investments across DeFi protocols. There’s monthly liquidity under the commingled structure, which the marketing materials say has had zero down months.&nbsp;



It’s intended to appeal to both traditional finance backers and crypto native investors looking for yield in the wake of Silicon Valley Bank (SBV) folding — as well as the likes of Signature Bank, two of the sources said.&nbsp;



It invests in “blue chip” pools of DeFi assets, engaging in collateralized lending, also known as yield farming, and it’s been marketed in a way that might appeal to credit investors with an appetite for risk beyond plain vanilla bonds. Old Street isn’t exactly going after the distressed debt TradFi crowd here, sources said.&nbsp;



The marketing materials list a number of US stablecoins, including <a href="https://blockworks.co/price/usdt" target="_blank" rel="noreferrer noopener">USDT</a>, <a href="https://blockworks.co/price/usdc" target="_blank" rel="noreferrer noopener">USDC</a>, <a href="https://blockworks.co/price/busd" target="_blank" rel="noreferrer noopener">BUSD</a>, <a href="https://blockworks.co/price/dai" target="_blank" rel="noreferrer noopener">DAI</a>, <a href="https://blockworks.co/price/fxs" target="_blank" rel="noreferrer noopener">FRAX</a>, <a href="https://blockworks.co/price/tusd" target="_blank" rel="noreferrer noopener">TUSD</a>, <a href="https://blockworks.co/price/usdp" target="_blank" rel="noreferrer noopener">USDP</a>, <a href="https://blockworks.co/price/usdd" target="_blank" rel="noreferrer noopener">USDD</a> and <a href="https://blockworks.co/price/gusd" target="_blank" rel="noreferrer noopener">GUSD</a>.&nbsp;



It’s intended to be the safe play that limited partners with billions of dollars at their disposal ought to be able to grasp: low volatility, at least so far, coupled with the inherent transparency of blockchain technology. The crypto cash play doesn’t take directional bets and prominently states in its marketing materials that it has “zero exposure to Bitcoin, etc.”&nbsp;



And it’s being shopped around to investors as combining quantitative elements with fundamental research — the kind of “quantamental” language that Wall Street types ought to be able to grasp, might be able to get behind.&nbsp;



It holds assets held by Old Street on-chain, which the firm says results in “access to opportunities not possible off-chain.”&nbsp;



Crypto custodian Fireblocks, as well as the FCA-regulated TrustVault, have been put in place as counterparties on Old Street’s multi-signature solution to safekeeping client cryptoassets, according to the materials.&nbsp;



<h2 class="wp-block-heading">The crypto long haul</h2>



The collapse of FTX and the crypto meltdown that marked the end of last year didn’t help the grand capital raising aspirations of Old Street and its competitors.&nbsp;



Macro conditions and regulatory concerns aside, though, Ridley said that the disconnect between household crypto names and household finance names is still frustrating, at least at times, across the board.



In describing Clarke’s credentials, Ridley said he was “pretty much at the top of the profession…in the equities world” when he was running $30 or so billion at BlackRock.



Clarke is 54 and is a “fund management nerd first, but he’s alternative enough to have a cool haircut, and spend his time thinking about tokens now,” the Old Street chief executive said.&nbsp;



“I always argue that he’s a bigger name than [Mike Novogratz, the founder of Galaxy Digital] is,” Clarke said. “It’s just that no one gives a shit about equities. And we’ll stand on a stage and yell and scream and sweat or whatever, right…To make a long story short, we&#8217;re trying to approach crypto in a different way that we think is going to be much more attractive to be the biggest kind of investors out there. Despite everything that&#8217;s going on in the crypto market and whatever.”



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BlackRock

Former BlackRock Global Equities Head Running Crypto Fund

<div id="highlights-block_62bb7f7f4762b" class="highlights">
 <ul>
 <li>The firm has carried out more than 30 reviews of asset managers to date at the behest of institutional investors, with more in the pipeline</li>
 <li>It’s a departure from the thick rounds of layoffs that have permeated crypto companies of late caught off guard from the market’s steep nose dive</li>
 </ul>
 
</div>



A digital assets-focused due diligence startup run by two traditional finance veterans is one of a handful of companies in the space building out its business through a deep-rooted market downturn.&nbsp;



Quentin Thom and James Newman’s London-based perfORM has started conducting deep dives on crypto exchanges and other service providers, in addition to the platform’s bread and butter of conducting due diligence on blockchain venture capital and hedge fund firms at the bequest of deep-pocketed institutional investors considering backing such entities.


<div class="wp-block-image">
<figure class="alignright size-medium"><img loading="lazy" decoding="async" width="200" height="300" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/06/Quentin-Thom-Profile-200x300.png" alt="perfORM's Quentin Thom" class="wp-image-23619" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/06/Quentin-Thom-Profile-200x300.png?w=200 200w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/Quentin-Thom-Profile-200x300.png?w=172 172w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/Quentin-Thom-Profile-200x300.png?w=174 174w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/Quentin-Thom-Profile-200x300.png?w=146 146w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/Quentin-Thom-Profile-200x300.png?w=53 53w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/Quentin-Thom-Profile-200x300.png?w=33 33w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/Quentin-Thom-Profile-200x300.png?w=552 552w" sizes="auto, (max-width: 200px) 100vw, 200px" /><figcaption>perfORM&#8217;s Quentin Thom | Source: perfORM</figcaption></figure></div>


“It’s shining a light on an area that is, rightly or wrongly, perceived to be opaque,” Newman told Blockworks.



The startup is a contrary brightspot in an industry <a href="https://cms.blockworks.co/crypto-com-parts-ways-with-nft-head-following-layoffs/" target="_blank" rel="noreferrer noopener">beleaguered</a> by <a href="https://cms.blockworks.co/blockfi-parts-ways-with-head-of-us-trading/" target="_blank" rel="noreferrer noopener">layoffs</a>, compensation cuts and rescinded job offers as executives jockey to buffer their balance sheets in the wake of the implosion of the stablecoin UST and the shockwaves that crypto lender Celsius’ demise has sent spiraling through trading desks this month.&nbsp;



Thom — formerly an executive at Deutsche Bank’s European prime brokerage department servicing traditional hedge funds — and Newman — who most recently spent about a decade in due diligence for Barclays — have now conducted upwards of 30 reviews on asset managers, not counting the growing number on the sell-side, the co-founders told Blockworks. And they’re looking to hire, perhaps in prime position to snap up talent cut loose from other companies making cutbacks.&nbsp;



“It feels like a perfect storm,” Thom said of the market’s crash. “Now is such a good time, when criticism is as high as it is now, to sell assurance and reassurance to what ought to be really an excellent and interesting and dynamic industry to those institutions who are probably tiptoeing back a little bit.”


<div class="wp-block-image">
<figure class="alignright size-medium"><img loading="lazy" decoding="async" width="200" height="300" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/06/James-Newman-Profile-200x300.png" alt="" class="wp-image-23622" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/06/James-Newman-Profile-200x300.png?w=200 200w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/James-Newman-Profile-200x300.png?w=172 172w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/James-Newman-Profile-200x300.png?w=174 174w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/James-Newman-Profile-200x300.png?w=146 146w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/James-Newman-Profile-200x300.png?w=53 53w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/James-Newman-Profile-200x300.png?w=33 33w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/James-Newman-Profile-200x300.png?w=552 552w" sizes="auto, (max-width: 200px) 100vw, 200px" /><figcaption>perfORM&#8217;s James Newman | Source: perfORM</figcaption></figure></div>


A number of recent reviews for large limited partners have resulted in those backers writing checks to cryptoasset managers, even though recent events had made them reluctant to do so, Thom said, declining to name the entities involved.&nbsp;



The growth comes on the heels of Celsius and Voyager, the crypto lender facing steep losses after its margin calls of hundreds of millions of dollars to one-time industry standout — and now beleaguered — digital assets-focused hedge fund firm Three Arrows Capital were not met.&nbsp;



Unlike most of the industry, their woes are a potential boon to perfORM: The company can offer clients a review of how to protect their assets in the event of a bankruptcy or broad-based restructuring, where they would likely be far down the line of those looking to recoup funds as unsecured creditors.&nbsp;



There’s also a long list of crypto’s skeletons in the closet — money laundering, mismatched incentives, shady liquidity provision and governance — that Thom and Newman are looking to capitalize on by preventing their clients from falling prey to such pitfalls.&nbsp;



And that’s especially true with traditional financiers who know the ins and outs of due diligence on stock pickers, but are lost when it comes to the crypto arena. From custody to leverage to counterparty risk, it’s an entirely different set of questions.



The firm is also closing on a review for a top-tier European sports league, as well as tapping an outside firm to do “hardcore deep dives” on potential hires for crypto companies. The team could also assist with tokenomics for firms issuing their own digital assets for the first time.&nbsp;



Due diligence examinations now are largely conducted on a one-off basis in the space, leading to a “huge internal effort to manage multiple due diligence enquiries,” the firm wrote in marketing materials. In most cases, service providers don’t get to see the reports perfORM assembles in an effort to prevent them influencing the content.&nbsp;



But the firm is working on what they dub an “industry first”: perform an operational examination on service providers that the firms in question can then send free of additional charge to clients. And there are slated updates every six months in a bid to prevent out-of-date information.



One potential perfORM client, who was granted anonymity because they’re not permitted to speak to the press, said many startups get a “lot of hype for being unique,” adding that this operation is doing something truly different — at least when it comes to digital assets.



“In TradFi, due diligence is cookie cutter; it’s taken for a given,” the source said. “Crypto doesn’t have that, and this is a big step toward transparency.”



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