In recent years, cryptoassets’ attractiveness as an alternative investment class has expanded to captivate a broad spectrum of investors. While traditional investments remain dominant within the financial market, 2020 has seen major advances towards the adoption of cryptoassets as a mainstream asset class. As Bitcoin’s recent surge in performance indicates, the mid-week announcement that PayPal will now be offering crypto services is a huge step towards the widespread adoption of cryptocurrencies.
While the first quarter of 2020 was tumultuous for the entire global market, the recovery seen over the 2nd and 3rd quarters, despite the continued impact of the pandemic, would certainly have been any investor’s optimistic outcome. Despite markets closing out the quarter under pressure, Invictus Capital has shown in their quarterly report an average quarterly return of 5.4% in US dollar terms (29.5% annualized) across their 7 funds, with a strong medium- and long-term outlook.
As Invictus Capital has set up several new funds in recent quarters, (and with subsequent funds in the pipeline) their quarterly reports have now been condensed into one single document. This report provides a detailed insight into their overall performance, detailed analysis of traditional, as well as crypto markets, and Invictus Capital’s financial outlook.
While the company’s funds each showed strong performance over the quarter, the stand-out performer was Crypto20 (C20) – up 30.4%. C20 is the world’s first tokenized crypto index fund, which tracks the top twenty cryptocurrencies by market cap. On a year-to-date basis, C20 has risen an impressive 72.1%. Unlike most of Invictus Capital’s funds, C20 is a closed-ended fund, which means its token supply is limited. You can trade C20 on several exchanges including UniSwap, OVEX, and HitBTC. Crypto investors will be pleased to hear that Crypto20 is a single token that benefits from the appreciation of the world’s most widely recognized digital assets.
Despite the decline of safe interest returns in traditional markets to near, or below zero, the Invictus Margin Lending Fund (IML) achieved an annualized return of 11.5% for the quarter. The fund allows investors to take advantage of the cryptocurrency market’s volatility with lower risk and high reward, having historically offered over 10% returns in dollar terms (annualized) and no anticipated, or yet-experienced drawdown. With ultra-low interest rates on yield-bearing investments such as government and corporate bonds likely to persist, funds such as IML provide investors with alternative investment options to traditional fixed-income products, with greater upside potential.
Being the first tokenized venture capital fund in the world, the Invictus Hyperion Fund (IHF) provides an alternative to the shaky financial markets and the limited returns available to the average investor. Hyperion allows everyday investors to gain access to the lucrative potential of venture capital. The crypto industry is currently booming, with many of the company’s portfolio investments benefiting from the COVID-induced shift towards digitisation. IHF appreciated a further 4.71 % over the period, reaching a net asset value of over $22,000,000.
Within a month of the IBA fund’s launch on the 13th of August this year, it reached almost half a million dollars in early subscriptions. This came off the back of the successful launch of the Invictus Gold Plus fund (IGP) in the second quarter. IBA utilises an options strategy known as a collar to protect the fund’s value from falling more than 10% over any calendar month, while limiting upside to around 30%.
The fund’s backtest demonstrates this to be a highly effective strategy in a market like Bitcoin’s, which is characterised by periods of accumulation followed by sharp reversals. The Bitcoin Alpha fund aims to outperform Bitcoin over the medium to long term, but has yet to trigger its “win condition” of a sharp downside correction.
DeFi was certainly on everyone’s radar in 2020, with both early adopters and naysayers contributing to the buzz. Due to its decentralised nature, and the ability for early adopters to participate in governance, the expansion of DeFi has been explosive. This, along with institutional adoption and the application of traditional financial models to the crypto market, has created a positive outlook for DeFi, and global adoption of cryptocurrencies as a whole.
The pandemic has shaken both traditional global stock markets and alternative assets, but ready support has been found – particularly from global central banks. With the threat of the pandemic expected to ease in the coming months, the weight of this enormous monetary and fiscal stimulus is likely to fuel elevated levels of inflation – a goal clearly announced this quarter by the US Federal Reserve.
This bodes well for fixed-supply assets such as crypto and gold, despite the latter taking a hit in September, sending gold back below $1,900 for the first time since July. There are, however, expectations of a continued pickup in global inflation expectations and a high likelihood that central banks will prevent bond yields rising too rapidly – meaning real bond yields may continue to fall. This would reduce the opportunity cost of holding assets such as gold or crypto, boding well for most of Invictus’ funds.
Investing in cryptoassets can be challenging. They historically offer both high risk, and high-reward outcomes. Despite the seemingly polarised opinions of this asset class, there is a middle-ground to be found, as the steps towards mainstream adoption and increased stability are being made. The building blocks for the next digital evolution of financial marketplaces are taking shape. In the midst of a difficult year for traditional financial markets, and for the world as a whole, the future of cryptoassets remains positive.
The CEO and founder of Invictus Capital, Daniel Schwartzkopff, has recently unveiled new plans for the future of the company, including the roll-out of the InvictusCapital.com Token (ICAP). The global market may still be finding its feet after a difficult year, but Invictus Capital is boldly moving forward with strong mid- and long-term outlooks.
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