XBTO, a cryptocurrency firm led by two SAC Capital alums, has launched an index fund tracking major digital currencies.
The firm promises its XBTO Crypto Index Fund will offer exposure to the top 10 cryptocurrencies, according to an offering document obtained by Institutional Investor. The fund is now being opened to outside investors after launching back in March with only seed capital.
In the offering document, XBTO estimated that the cryptocurrency asset class had a market capitalization of roughly $220 billion as of October 1, citing what it called “various sources.”
The 10 largest cryptocurrencies represent about 85 percent of this market cap, XBTO said. As a result, the index fund provides “broad exposure to the asset class without the concentration risk of investing in just one or two single cryptocurrencies,” according to the document.
The firm declined to comment.
XBTO was founded in 2015 by Philippe Bekhazi and Walton Comer. Today it is a major crypto market maker and asset manager serving large institutional traders.
Philippe Bekhazi, who serves as the firm’s chief executive officer, said in the document that he began personally investing in Bitcoin in 2011. He previously worked at Citi and Calypso Technology, where he created trading, portfolio, and risk management solutions for clients who traded equities, foreign exchange, interest rates, and credit. Before that, he spent nearly four years as a derivatives trading analyst at SAC.
It was while at SAC that he met Walton Comer, who serves as XBTO’s chief investment officer. Before the launch of XBTO, Comer was a founder and principal at Falcon Bridge Partners, a quantitative, high-frequency commodities trading platform.
Brice Wilson, chief operating officer, rounds out the management trio. He is responsible for the fund’s trading, operations, and investor relations and oversees overall asset management. Before joining XBTO in 2017, he spent seven years at fund-of-funds firm Magnitude Capital, serving as head of the managed account platform and head of operational due diligence.
In its offering document, XBTO asserted that the return stream of cryptocurrency has historically had low correlations to other asset classes. In fact, its correlation to both the S&P 500 Index and Nasdaq 100 is a mere 0.04 (a direct correlation would be 1.00).
The firm’s new index fund is actively managed and provides passive exposure to cryptocurrencies. It also offers a daily liquidity share class. It does not charge a performance fee, but it does come with a healthy management fee.
Although the fund promises to offer exposure to the top 10 cryptocurrencies, roughly 60 percent of the assets were invested in Bitcoin as of the end of September, according to the offering document.
Two other crypto currencies — Ethereum and Ripple — each accounted for more than 12 percent of assets.