The rapidly changing world of crypto investments has reshaped how investors think and how fundraisers navigate this market. In this article, I will share three proven strategies for raising capital from crypto hedge funds.
I am Isaac Joshua, a fundraiser at Silver Castle, a publicly traded digital assets investment group. I have five years of experience in sales in the crypto industry, and in the past five months (March-August), I have engaged in valuable conversations with over 80 crypto hedge funds. These talks were a crucial part of my journey to raise capital for our hedge funds. Importantly, I also reached out to Funds of Funds and other crypto funds that invest in crypto-native hedge funds like Silver Castle. The following strategies allowed us to grow our Assets under Management (AUM) by 47% during the bear market of 2022, despite a 65% decrease in BTC.
1. Mastering Risk Management for Success
The crypto market is known for its volatility, so it is essential for crypto hedge funds to have strong risk management practices in place. This includes being transparent, compliant, and operationally strong. Investors want to be confident that their money is safe, so it is important to build trust through these actions.
The PwC and Coinshares 5th Annual Global Crypto Hedge Fund Report 2023 ('Rebuilding Confidence in Crypto') found that crypto hedge funds are placing increased importance on platform security when selecting a trading venue. The report also found that 53% of crypto hedge funds have taken action to update their counterparty risk management processes.
Silver Castle takes this a step further by having insurance from Lloyds of London on our BTC held in the funds, which takes the operational/counterparty risk to 0%.
VC shifts focus: AI in, Crypto out?— Naka Solutions (@NakaSolutions) September 13, 2023
hat does this mean for the future of crypto?
In Q2 2023, global crypto venture funding fell by 49% compared to the same period in 2022.
Crypto: A Sector Regrouping
📉 Crypto firms worldwide raised $5 billion in the first half of this year,… pic.twitter.com/JlKHSxx9KH
2. Embracing Institutional Standards
Investors in crypto hedge funds are increasingly demanding institutional-grade services. This includes robust custody solutions and strong cybersecurity.
The PwC and Coinshares report found that 59% of crypto hedge funds use multiple types of custody. Among those that use one type of custody, 67% use a third-party custodian. This suggests that crypto hedge funds are taking steps to meet the demands of institutional investors.
3. Combining Knowledge: Merging Traditional Finance and Crypto Expertise
The crypto industry is moving towards combining traditional finance expertise with crypto knowledge. This is evident in the trend of forming teams that integrate crypto expertise with seasoned financial know-how. This strategic shift played a significant role in guiding our focus towards crypto funds in 2023.
The PwC and Coinshares report found that 60% of crypto hedge funds have a team with experience in traditional finance. This suggests that the industry is recognizing the value of combining these two skillsets.
The crypto investment landscape is constantly evolving, but the three strategies outlined above remain essential for raising capital from crypto hedge funds. By mastering risk management, embracing institutional standards, and combining knowledge, crypto hedge funds can position themselves for success in the years to come.
The article constitutes the personal opinion of the writer. This does not constitute an investment recommendation.