Two Prime Teams With Bain Capital-backed Venture Fund

Digital assets investment manager Two Prime has partnered with financial infrastructure venture fund Uncorrelated Ventures as it looks to quicken its growth and expand its network.

Uncorrelated Ventures, led by former Bain Capital Ventures managing director Salil Deshpande, now owns a 12.5% stake in Two Prime.

“We were in no need of funding, and so the interest in it is just to grow our network more quickly into the institutional realm,” Two Prime Managing Partner Alexander Blum told Blockworks. “[Deshpande’s] background at Bain Capital [Ventures] and a few other well-known funds prior to that will help us increase our reach and growth as we start our second year.”

Bain Capital Ventures is the venture arm of Bain Capital, a private multi-asset alternative investment firm with roughly $155 billion in assets under management. 

Deshpande worked at the venture firm from 2013 to 2020 — and was a general partner at Bay Partners for seven years prior to that — before starting Uncorrelated Ventures. In the last 15 years, he has invested more than $350 million into roughly 50 companies, including those focused on traditional and decentralized infrastructure.

“Venture investors appropriately spend all their time seeking out alpha in their disciplines, but years ago I began feeling that even the beta of crypto might outperform the alpha of non-crypto, and that thesis has played out,” Deshpande said in a statement.

“Crypto beta-capture funds such as Two Prime’s have been valuable instruments in implementing these theses alongside crypto alpha.”

Blum co-founded Denver-based Two Prime in 2019 with Marc Fleury. Blum had previously founded digital investment group Atomic Capital, while Fleury had created open-source application server JBoss, which he sold to Red Hat — a company ultimately acquired by IBM — in 2006 for $350 million.

Two Prime Chief Investment Officer Nathan Cox was formerly the CIO for Prana Capital Group, where he developed and managed derivatives, futures and equity strategies for the firm’s volatility focused hedge fund.

The firm, registered with the Securities and Exchange Commission (SEC) as an investment advisor, has grown to more than $125 million in assets under management through its two funds and separately managed account offerings. 

The Two Prime Digital Assets Fund, which launched in June 2020 and was opened to outside investors in February 2021, uses a derivatives-overlay on a net long bitcoin and ether portfolio to hedge out 50% of downside volatility. Net of fees, the fund has returned 742.8% in the trailing 12 months, compared to 466.1% for bitcoin over the same span, according to the firm.

The fund blends traditional statistical indicators with crypto-specific measures to fuel high risk-adjusted returns, Blum previously told Blockworks.

Meanwhile, the Two Prime Liquid Yield Fund, which the firm launched on June 1, is generating about 17% annual percentage yield by utilizing vetted and code-audited DeFi stablecoin staking protocols, according to the firm.

Two Prime does not yet have plans to sell more of the company, Blum said. He noted that though the firm could look to add products over time, it’s currently focused on its existing offerings.

“Like everybody else, I’m interested in DeFi, altcoin fund or an NFT fund at some point in the future,” Blum said. “But we’re pretty focused on just growing our institutional investment base within these products.”

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