On May 9, management company Arquant Capital received AMF approval to market a portfolio of funds for professionals 100% invested in cryptocurrencies. It is the first asset manager in France approved by the Autorité des Marchés Financiers for actively managed funds invested directly in cryptocurrencies and the first to work with Ethereum.
Already several regulated funds
In 2019, Napoleon AM became the first regulated crypto fund in France. Unlike the funds offered by Arquant, it does not store bitcoins directly, but reproduces its results through structured products. On the other hand, like Arquant, this fund is aimed at professional and institutional investors.
In 2017, Tobam was the first to launch with a non-regulated fund that invested 100% in bitcoin. Only in 2019, the adoption of the law on the Covenant made crypto assets available for investment by specialized professional funds, which made it possible to create regulated funds. In 2021, Tobam paved the way for retail investment in crypto assets by launching the first AMF-approved fund eligible for life insurance exposure to bitcoin and international stocks, including activities related to blockchain and bitcoin.
Combination of algorithmic and human control
Arquant’s offer is primarily aimed at family offices, private banks and wealth management advisors, high net worth investors and long-term investments. As a rule, she advises not to exceed 5% of the asset allocation in cryptocurrencies that are of interest for a diversification strategy, since they correlate very little with other asset classes. The company’s goal is to reach about one hundred million euros in assets under management by the end of 2022.
The Arquant model combines algorithmic control and discretionary control. “to support the volatility of this very risky asset class”, explains its president Heron Angele, who has worked for Caisse des Dépôts and Banque Postale Asset Management. The goal is to achieve a higher return than the 5-year underlying with lower volatility. To do this, its management teams are made up of professionals in asset management, blockchain, and quantitative finance.
Before embarking on collective management, the company proposed management mandates on which it claims to have achieved double-digit results since the beginning of the year.
Crash, “good thing” to clear the market
Arquant Capital will be the first management company to launch an Ethereum fund. It was on this cryptocurrency that the company, founded in 2019, tested its model. Protocol she believes in because “Ethereum will be the key to Web3 and the scope is very, very wide.”Eron says to Angela. “In addition, moving the protocol from proof of work to proof of stake will improve the speed and energy balance of this blockchain.”
Bitcoin and Ethereum have crashed in recent months. Bitcoin hit its lowest level since 2020 on June 13 at €22,400. And Ethereum is trading below €1,200, more than 70% below its November 2021 peak.
According to the founder of Arquant Capital, this collapse “It’s good to test the stability of funds that have accrued too quickly. Cryptocurrencies should be viewed as small caps or emerging markets. Their trajectory is non-linear, there are peaks and corrections. We are going through a phase of market sanitation. our performance, we are close to the bottom”.
Bad time to launch your funds? “It is better to enter the market at this price level”notices Eron Angele.
Market segment under construction
In fact, the fall of cryptocurrencies does not seem to cool the management companies. According to Muriel Fauré, senior adviser at the asset management company and president of the Commission for Technological Innovation of the French Financial Management Association (AFG), who spoke at a conference on crypto assets last week, “bmany management companies are interested in cryptoassets”. AFG has set up a working group with the French Association of Securities Professionals (AFTI) on this issue.
“In 2023, I think some of our members will face requests from institutional investors. On the other hand, 34% of young people aged 18-24 are considering investing in cryptocurrencies. Management has the ability to manage this money for I am convinced. that the management of cryptoassets will evolve and competition will become increasingly fierce”, she adds.
Arquant Capital, which employs eight people, has raised €1.6m in two rounds in 2020 and 2021 and is in the process of closing a new €1m funding round.