Citigroup Executives Seek $100M for Crypto Hedge Fund

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Three for­mer Cit­i­group Inc. exec­u­tives have left the Wall Street bank to form Motus Cap­i­tal Man­age­ment, a com­pa­ny aim­ing to make it eas­i­er for high net-worth indi­vid­u­als to invest in cryptocurrencies.

The three exec­u­tives, Alex Kri­ete, Greg Gira­sole, and Frank Cav­al­lo, seek $100M in fund­ing for two active­ly man­aged hedge funds focus­ing on vir­tu­al cur­ren­cies. “Clients are hun­gry for returns,” said Kri­ete. “They’re want­i­ng expo­sure, but they have a hard time telling what’s scam­my and what are real invest­ment opportunities.”

Kri­ete for­mer­ly man­aged $3 bil­lion in assets for pri­vate clients at Cit­i­group, while Gira­sole man­aged $5 bil­lion. Upon leav­ing Cit­i­group to co-found Motus, Kri­ete said on LinkedIn, “…I believe dig­i­tal assets will con­tin­ue to grow in impor­tance to glob­al cap­i­tal mar­kets and the for­ma­tion of new busi­ness mod­els.” Before leav­ing to co-found Motus Cap­i­tal Man­age­ment with Kri­ete and Gira­sole, Cav­al­lo served as an invest­ment coun­selor at Citigroup. 

The three sea­soned Wall Street vet­er­ans will plow their own mon­ey into the growth and income hedge funds. The growth fund will focus square­ly on cryp­tocur­ren­cies with a small­er mar­ket cap, unsuit­able for invest­ment by more con­sid­er­able funds. “We think we hit the sweet spot,” he said. “With assets like bit­coin and ETH, clients can do that on their own. They don’t need to pay some­one to buy bit­coin.”

Hedge funds are a growing niche, with $3.8B invested

Hedge funds are usu­al­ly lim­it­ed-lia­bil­i­ty part­ner­ships that pool cap­i­tal from investors and employ risky strate­gies such as long­ing, short­ing arbi­trage trad­ing, and fun­da­men­tals-based invest­ing to gen­er­ate high returns. The medi­an cryp­to hedge fund yield­ed 128% in 2020 from 30% in 2019, but investors need to hold their mon­ey in the fund for over a year.

Motus is enter­ing a sparse­ly pop­u­lat­ed asset man­age­ment land­scape. A 2021 report by PwC sug­gests the glob­al asset val­ue under man­age­ment in cryp­to hedge funds is $3.8 bil­lion, up $1.8 bil­lion from 2019, with a lit­tle less than half (46%) of all the com­pa­nies sur­veyed hold­ing assets exceed­ing $20 mil­lion. Those invest­ing in these funds must invest over $100K, mak­ing the invest­ment fea­si­ble only for insti­tu­tion­al and high net-worth investors. The report by PwC con­firms that the 150 cryp­to hedge funds in oper­a­tion man­age assets by high-net-worth indi­vid­u­als (54%) and fam­i­ly offices (30%). The growth in cryp­tocur­ren­cy hedge funds has coin­cid­ed with bitcoin’s per­for­mance between 2012 and 2021.

How do Wall Street companies view crypto hedge funds?

As the pop­u­lar­i­ty of cryp­to increas­es, many hedge fund vet­er­ans are bet­ting big on the future of cryp­tocur­ren­cy. The largest hedge fund glob­al­ly, Bridge­wa­ter Asso­ciates, is plan­ning to invest in a cryp­to hedge fund but does not plan to invest in cryp­tocur­ren­cies direct­ly. The firm’s founder, bil­lion­aire Ray Dalio, owns some of the most pop­u­lar cryp­tocur­ren­cies like bit­coin and has warned that gov­ern­ments will out­law the dig­i­tal cur­ren­cy if it becomes too popular.

Founders of hedge funds like Tudor Invest­ment Corp. and Alan Howard are now expand­ing their cryp­to trad­ing oper­a­tions. Both have pre­vi­ous­ly worked at giant firms such as Mor­gan Stan­ley and Cit­i­group and have exten­sive expe­ri­ence in the finan­cial industry.

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