Two senior portfolio managers have tendered their resignations at BlackRock ahead of launching a cryptocurrency hedge fund.
Michael Wong, a senior portfolio manager who led BlackRock’s fixed income asset allocation division, and fellow fixed income specialist Adam Grimsley left the world’s largest asset manager to found Prime Factor Capital. The duo will be joined at the firm by Nic Niedermowwe, an Oxford-trained mathematician, according to a Financial News report.
“There are a myriad of issues faced by investors hoping to get into cryptocurrencies,” Niedermowwe told the publication. “Many don’t know how it works, how to install them, how to allocate — whether they just buy bitcoin or a range of cryptocurrencies — compliance issues, while storing them securely is a big concern.”
The fund aims to achieve £10 million of assets under management (~$14 million), a relatively small amount compared to many cryptocurrency hedge funds. BlockTower Capital, for instance, recently announced that it had raised $140 million, while former Fortress manager Mike Novogratz had planned to launch a $500 million fund before shuttering those plans in favor of opening a crypto-focused merchant bank.
Though minor in terms of assets under management, however, the creation of Prime Factor Capital is another example of portfolio managers at entrenched firms jumping ship to chase the outsized returns available to skilled cryptocurrency investors.
This trend has been exacerbated due to the hesitance of large firms to bet on this burgeoning asset class and outright hostility of some financiers toward its very existence. BlackRock CEO Larry Fink, for instance, has called bitcoin an “index of money laundering,” while Vanguard founder Jack Bogle recently advised investors to “avoid bitcoin like the plague.”
“The market is still at an early stage,” concluded Niedermowwe. “It’s rare for a big institutional asset manager to commit to a new asset class, particularly if they don’t feel the market is there. It’s not surprising that they’re biding their time. We view this as an opportunity.”