UK based a hedge fund, Nickel Asset Management, is reporting the first digital assets arbitrage strategy fund run by a UK FCA-regulated manager. The Nickel Arbitrage Fund will apply market-neutral, low-latency algorithmic trading to crypto securities, according to a release. Nickel states that within 2 months of launch, the arb fund has raised USD $50 million from funds of funds and family offices in the UK, Europe, North America, and Singapore.
The fund was registered with the FCA as an Alternative Investment Fund in early 2019. The fund has announced a “soft close” to new investors.
Nickel explains that it will exploit volatility and pricing inefficiencies in digital assets to drive returns. The fund will take advantage of the “extreme swings” in crypto to “deliver low volatility” performance.
Investing strategies include “triangular arbitrage, futures basis trades, swap trading, and volatility arbitrage.”
Michael Hall, Chief Investment Officer of Nickel, said they are taking their expertise from traditional assets and migrating them to digital assets:
“As long as digital assets and their derivatives trade on multiple exchanges across the globe, with sufficient speed and execution quality, we can profitably make markets, while improving liquidity for other market participants,” said Alek Kloda, Portfolio Manager.
Nickle states that while crypto arbitrage funds exist in Singapore and the US, regulatory hurdles have held back similar attempts in Europe until now.
Nickel claims to be the first fund manager globally to provide a solution for securely managing digital assets on multiple trading platforms. Nickel explains that until now, “hedge funds have been using a self-custody model for digital assets. Since blockchain transactions are irreversible, the risk of a single point of failure has been the key reason for institutional investors avoiding exposure to the asset class at any significant scale.”
Anatoly Crachilov, CEO of Nickel said their vision is that it’s simply a matter of time until digital assets become part of institutional portfolio allocation for forward-looking investors around the world:
“… we aim to build an institutional-quality gateway to this high-octane world of digital assets.”
Nickel says the fund may reopen to investors for a limited window later this year.
Fund investor David Fauchier, CIO at Cambrial, called the fund close a “watershed moment for institutional crypto trading.”
“The uniquely experienced team coupled with the firm’s advanced custody solution have won endorsement from institutional investors.”
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