Australia’s First Digital Capital is opening up a $30 million Bitcoin and blockchain fund – but there’s one very good reason it’s avoiding local investors.
The FDC Portal Fund will launch in Singapore on June 26, followed shortly after by a launch in Hong Kong.
The company’s chief investment officer, Patrick Bennett, has confirmed the fund will not target Australian investors – instead concentrating on raising $30 million from Asian investors.
Aussie wholesale investors wary of Bitcoin and blockchain
Bennett told InnovationAus.com that he’d found Australian investors are much more risk averse and wary of Bitcoin, crypto, and blockchain than investors overseas.
“We hosted a number of roadshows recently but the feeling we got from Australian wholesale investors was yes, they were interested but they also wanted to wait and see. They’re fairly conservative,” he said.
Bennett said the Bitcoin mania around the all-time high had turned many serious local investors off cryptocurrencies.
“(The) euphoria that was around Bitcoin in 2017 … that’s been dampened in 2018 when Bitcoin collapsed in value. It lost 80 percent of its value, and a lot of other coins and tokens also lost nearly 90 percent of their value.”
“People have become a bit wary. This has been driven by retail investors. When you start hearing hairdressers and taxi drivers telling you how much they’re making out of bitcoin, it’s time to get worried,” Mr. Bennett said.
“But that has been masking the uptake of the institutional market. We are starting to see large companies get involved because they see it as a quicker, cheaper and more secure way of exchange.”
Bitcoin and blockchain ‘fund of funds’
Two years in the making, the First Digital Capital Portal Fund will have a ‘fund of funds’ structure as a way of minimising volatility.
Instead of investing directly in cryptocurrencies, the fund will spread the capital raised among seven other funds that specialise in trading digital assets such as Bitcoin or invest venture capital for the long term in companies developing blockchain technologies or protocols.
Strong team behind First Digital Capital
First Digital Capital has a strong team. Bennett is a specialist in investment research and portfolio management formerly from Colonial First State.
Chief executive Deryck Graham was the co-founder of aerospace defence contractor QHL and is the owner of Golden Rivers Mining.
The advisory committee includes former Wall Street Journal columnist Michael Casey and IBM Blockchain Labs director Nitin Gaur.
The company website describes the FDC Portal Fund as a ‘Cayman Island fund’ investing in other funds using ‘high-performance quant trading’ and ‘best of breed long only’ investments in blockchain infrastructure.
The investment thesis is that as digital currency markets are young and inefficient, they present great trading opportunities for algorithmic traders with returns that are uncorrelated to those from traditional assets.
Smoothing out volatility
Bennett said that the idea behind a ‘fund of funds’ was to smooth out volatility in crypto and blockchain investing.
“What we’re looking to do is avoid the peaks and then the collapse afterwards. We want a far smoother journey,” he said.
“Our idea is to make money when it’s there to be made but not to lose it. This will deliver far more consistent returns.”