The Allocator's Perspective on Digital Assets | DAS London 2025 | Day 3 | Main
Summary
Investment Theme: The podcast discusses the growing legitimacy of digital assets within institutional portfolios, highlighting their transition from fringe investments to mainstream consideration.
Market Insights: Allocators emphasize the positive asymmetry and potential upside of digital assets, comparing them to traditional assets like gold and highlighting their role in portfolio diversification.
Company Discussions: Key figures from Amitus Capital, XPAN, and Crossbridge Capital share their experiences and strategies in managing digital asset investments, focusing on venture capital and liquid strategies.
Opportunities: The discussion highlights the potential for exponential growth in the digital asset space, with predictions of market cap expansion from $4 trillion to $100 trillion by 2032.
Risk Management: Emphasis is placed on the importance of risk management, particularly in market-neutral strategies, and the need for institutional investors to diversify across strategies and ecosystems.
Manager Selection: The panelists discuss the importance of understanding investment philosophy over track record when selecting managers, advocating for a barbell approach combining passive and active management.
Fund of Funds: The benefits of fund of fund structures are explored, particularly for institutions seeking diversification and risk mitigation in the fragmented digital asset market.
Key Takeaways: The panel concludes with a bullish outlook on digital assets, driven by regulatory advancements and macroeconomic trends, suggesting that the asset class deserves a significant allocation in institutional portfolios.
Transcript
Hi everyone. I'm Sophia Horowitz. I'm a partner at LW3. Uh first of all, thank you Block Works for having us today. Um it's been a great event so far uh the last couple of days. Hopefully we can keep the energy up for this last panel on the main stage before launch the lunch break. Um so today we are focusing on the allocator's perspective on digital assets. Um over the past decade or so digital assets has really moved from the fringes to becoming a legitimate uh part of the conversation uh in institutions. So I guess I behind the scenes it is always the the allocators themselves um when it comes to digital assets who have been uh making the decisions really on and and and managing kind of how this asset class will be legitimized. So looking at how it's valued, uh how it's sized and managing uh its risks alongside traditional portfolios. Um so today I'm very pleased that we have three allocators with us who really sit at the heart of making those decisions. We have Chris Salars who's CIO of digital assets at Amitus Capital. We have Pierre Henri who is head of private investments at XPAN. Have I said that right? And then we have Manish Singh who is CIO at Crossbridge Capital. So for context uh to get started can we explain to everyone in the room a little bit about um your current roles and also give us a bit of um insight into how much of your time and your energy is spent on crypto. >> Let's start with Chris. >> Sure. Hi everyone. My name is Chris Solars. I'm CIO of Amitas Capital Digital Assets. We are a digital assets fund of funds um backed um and seated by uh family office here in London. Um I invest in venture capital uh and also liquid strategies including market neutral um and directional. Um and I guess my history with with um digital assets goes back about eight years and I have been an allocator to hedge funds for for 20 years now. And um one thing I've always appreciated is alpha um is the skill of kind of um eking out kind of that risk-free profit. And when I first saw cross exchange arb and in the early days we were making tripledigit type returns for me I didn't have to buy into the fact that these were an emerging technology. Um instead I was just kind of enamored by the fact that there was real alpha to be had. So that was kind of my entree into um into digital assets and I kind of joke that I I came for the arbitrage and I stayed for the technology. So so here I am today um and happy to be here. >> Thanks Chris. >> Hi. So uh I'm I'm Pierre. Uh I work at XPAM. We are a fund of hedge funds. All we do is digital assets and we're really a macro firm. So we we think about uh the full cycle, the full business cycle uh and uh invest in managers based off of that. Uh there I'm chief commercial officer and uh do uh our private investments and I started with um in 2016 I was a business school student at Stanford and we had all the technology coming through PaloAlto. So I learned about it there. I didn't really do anything. I had a traditional finance uh career before and then when COVID happened uh and like a fourth of all American dollars were printed in a month in history like markets were closed you say this isn't normal you start looking at gold real estate bitcoin things that are fixed in quantity and I went down the rabbit hole that way and basically we are uh very much uh looking at where to spend time and when you when you look at how assets have performed relative to inflation and debasement um it doesn't it's not as compelling right anywhere else you have uh you have exponential technology you have digital assets and so that that got me fully down uh this this career in industry so >> hi I'm Manish Singh I'm CI at crossbridgeidge capital most of what we do is on the traditional equity side unlike Chris and Pierre we are making small steps into that direction of moving on digital side we do get a lot of client query on what's happening in the digital business so for me, how did I get into digital world? The oldfashioned way, you know, first being a critique, not accepting it. I remember my friend Kelly, she mentioned to me to buy Bitcoin at $400. I didn't buy it. That was many years ago. Big mistake. So, you learn from that. So, we are seeing a lot of people on the traditional asset side who now understand that something new is being built up and you need to be part of that. So, we are not actively pushing it, but when we get more query, you have to be prepared to answer those questions. And how are each of you uh thinking about digital assets in a broader macro and in a portfolio construction context right now? Should we start with Chris? >> Yeah, sure. Well, maybe my my favorite part about digital assets is the positive asymmetry and the positive skew and what it can add to portfolio from a portfolio construction concept. Um, so I kind of start there, you know, and as a as a student of the markets, um, and as someone who's built portfolios over the years, we would typically talk about gold having positive skew and trend following strategies as positive skew. And that's so complimentary kind of it punches above its weight as an added component within within a diversified portfolio. And of course, that offsets emerging markets and credit which have this this negative skew. So I love digital assets for many reasons. one is that it has just you know tremendous upside potential and two that it's kind of more accretive uh per unit than um than anything else you can add to the portfolio right now. >> Right. So again we are a macro group I I have the privilege of working with a guy called Ral Pal who many of you will know every day and our view is uh that this is one of the great exponential technologies of our lifetime. So the whole space it's about 4 trillion. We we say within you know probably by 2032 it'll be at 100 trillion. And you again if you look at um where a global hurdle rate is for investment performance which is to us this whole debasement trend and and inflation uh not a lot beats that. It's basically some parts of the NASDAQ and you know AI and this digital assets. Uh so we actually think that this whole cycle is quite similar to 2017 and uh it's it's right translated so basically it's extended and so we think that uh you're going to see this debt maturity which is now so famous in the US that the government cannot pay for a huge amount which is based off of a 5-year or less term structure is going to mature and it needs to be paid for and so you're going to see monetization uh you're going to see we think a recovery in the ISM above the level 50 uh over into 2026 and it's still a high beta play on global liquidity. That was what drives this this asset class. So for us um uh that's firmly in place and so we're we're positioned for that and and we think that these managers uh are are the best way to express that view. >> Yeah, I would add to what Chris mentioned. You know, there's a high optionality in what's going on and you can't access that in the listed market. So you do have Coinbase or Circle IPO and there are a few others coming up. But like anything you know people who came early in the railroad business they went bankrupt and now they build the whole world and old economy around it. So so you will have the skeptics and you will have your gains and losses but this is the great asymmetric opportunity you have which you need to have access and have in the portfolio. So I see this as we are beyond the meme phase. Meme phase is over. This is more like a building phase putting the plumbing down building the infrastructure. So just like when you had the.com bubble burst in uh everyone thought the internet was over. I mean we have people like Paul Krugman who said internet is a fad. Look where we are today. So I think we at a stage where the the Googles and Amazons of this world are being built up and you have to be part of that and sometimes you do not get access to that in in the listed market as I said but they will have a place in the portfolio. You see on the banking side, we had the bank earnings yesterday and you heard Jamie Diamond and everyone else talk about what's going on. I believe that they will be running a much smaller enterprise. That doesn't mean the stocks are going to go down. I think banks are going to turn into tech company. They will get valued as a tech company. Not your 20 25p maybe 40 50p because they will have much more growth and earnings. So from a traditional point of view, I think you're coming where these things are going to merge and you're going to start looking at. So either you can get into it now through private business or fund for everything else or you're going to buy that enlisted market. You'll still do well because you know look at what happened to Nvidia over last two year let alone last five years. So there's a there's huge asymmetric optionality of something being built and you cannot ignore it. All of us see and have spent time with probably hundreds. Chris, I think for you and maybe for Pierre, it could be in the thousands of crypto managers um over your careers. Um what I think everybody in here is probably interested to know. What are the most compelling, the most interesting things that these managers are focusing on right now that spark your interest? >> Um this is a great question. Um and maybe I'll take it in three parts. Um because I really see the um crypto asset management universe in three different silos. Um so we have crypto market neutral and we had probably the best stress test we've ever had um over this weekend. Um and we're finding out a few that um you know that were wiped out that were part of the 1.6 million uh trading accounts that were liquidated. So we really found out you know as Warren Buffett says when the tide goes out who is swimming without a bathing suit. Um so risk management was very very important. Um so so look the the market neutral managers the opportunity set is still there. I think right now perhaps more than ever more than one week ago because um you know the leverage has down we've kind of been reset and after these big storms whoever is left with uh with with deployable capital is in a really good position going forward. So that's very exciting. I think within liquid directional these are longbiased generally longbiased uh token pickers um and what they're trying to do is um to really outperform Bitcoin um outperform a long biased index um so they see a lot of different um you know their portfolios can really really range I think the most exciting thing there is finally um since the beginning of this year um since we had regulatory change in the US we're seeing these managers really lean into tokens with real revenues with real fundamentals. Um they can almost apply an equity-like discounted cash flow um to future earnings. So we see you know tokens uh layer ones like salana and bitcoin but tokens like hyperlquid um and aerodrome and maple syrup that are really you know cash flow positive like that is kind of what is uh the biggest theme I see there and then in venture um I think venture has been a little bit tough on the asset raising um because of the cycle that we've been in these last few years we haven't seen a lot of DPI and that's kind of a challenge but it's just as exciting on the preede and seed side because there's a lot of exciting things there being built uh for the future. So I see opportunity across all three verticals. >> Yeah, I thought that was a great answer and I echo a lot of that. I think that um for the whole market cap of the space to get to 10 trillion, you need institutional investment and it still hasn't really come and what is going to compel those groups it it has to be real fundamentals that can be underwritten at an IC and withstand scrutiny over time. And so, uh, the protocols that were mentioned by Chris are great examples of that. Over the weekend, they often perform better than their centralized counterparts, which is a I think it's really compelling for people to say, I need to pay attention to this. Um, and uh, in general, I think what I would add is the other big trend this year has been this DAT phenomenon. Uh and basically uh the market structure right now is that people can invest in Bitcoin and Ethereum through an ETF and the wider ecosystem is still not really available. Some groups can't even through their mandate invest in spot or even the ETF. And so this was an opportunity to maybe form a bullish expression of of a particular protocol. And I think that the largest ones have worked very well because they actually uh have been diligence by these groups. And so again, it goes back to this idea that something needs to be familiar. you have to defend valuation with something like cash flow or some sort of sustained adoption that people can get comfortable with. As we see more of that, um I think that you're going to see more and more uh participation and some of these subscale DATs if they're not having these commercial partnerships and announcements that lead to those things. Um I think it's I think it's going to it's going to be difficult over time. So but but echo what Chris said beyond that. Yeah. >> Yeah. Just to add to what Chris said, you know, and and the tide goes out a lot in crypto world. So you have to be very careful about who you're working with as we saw on the weekend. But if you again look from the the traditional equity background, if you look at the back offices of big banks, you know, in trade settlement in intermediation that they do, I mean that is going to change a lot over time. And so DAT is a good example of what's happening. But then we heard from I think the the rep from JP Morgan on the panel yesterday and other people what's happening. So to me you are really addressing that part of the industry the big part now still if you talk about a bond issuance on chain which is still more like a PR thing than the real thing because there's still a back office trying to reconcile what settlement has happened so so we really haven't seen the big move in it. So I I still think that we are very early in what we are seeing but you're going to see real use case in industry real use case in banking. So you're seeing a a new monetary framework is being built up and while some people might be getting bullish on gold but you know there's something else happening and this is not your grandfather's gold this is something else which is being built around and and you really need to be part and understand what's going on or else you're going to get left out and with a digital framework and decentralization and trade and defi and everything that's happening you have a real framework is being built in front of you right in front of you with new and big winners. So when I see projects so people are working on tokenization tokenizing unit assets and if you look at the case of uh Black Rockck uh and what they are looking to do with their fund business, real estate business, you really have a big future being built up and this is coming from people who who didn't believe in blockchain or didn't didn't believe in these things. You can go and Google their videos from two three years ago where they didn't believe in this. And then you have people like Peter Schaef and I I saw a video last night of a guy who was banging about blockchain when it was $4,000 and Peter Schiff was ridiculing him. And yes, Peter Schiff is right on gold which is at $5,000. But look where Bitcoin has gone to at the same time. People are excited about silver has gone to all-time high. It took 40 years to go back to that all-time high. That's not how long it takes Bitcoin and everything else to go. So you can be skeptic and miss out on everything or you can take an interest and learn. And this is where given my equity background, I do a lot of structured equity trade. I see the optionality. I see a huge asymmetric option optionality in what is being built around us. Just touching on um some of the points you made there I guess Manish um in 2024 last year very few managers managed to outperform Bitcoin. How are you thinking about uh manager selection uh now and you know it can't really necessarily be based entirely on on track record obviously. >> Sure. So I always say it's easy to write the bull market. you know I you look for bears who can surf properly not not the bull market anyone can ride that and we saw that and it's also not about just one year because one year can just be a matter of luck what you really need is over cycles because it's not about having an exposure it's about sizing the trades I say this to everyone all the time you can copy my trade I'll tell that to you but you can't copy my conviction you can't copy how I'm going to risk manage it so when you're looking for managers manage selection don't go by just the track record of last year or the year before. You really have to understand the philosophy of how they look at investment, how they look at the world. To me, that is a big part of due diligence than somebody just beating because you got lucky on a trade or you had leverage on a trade. So you have to see over cycles when you're selecting a manager. I mean we are not doing manager selection on digital side because we are not as big on it. So we're getting exposure in a different way. But if you are doing manual selection on digital side to me that would be the first thing. So everything that we have learned on the traditional asset side is going to stay. It's just that you're going to apply the same risk measure and mentality on the digital sides. But the philosophy doesn't change how you look at risk or how you should size a trade. That should never change. And the people who use leverage on the weekend on a trade that already has a huge optionality found out what it does to you because there's already an option built in. So you already have a leverage. You don't need to go and lever again. So this fundamental understanding is very very important who's managing your money and who you're trusting your assets with. >> Yeah, maybe to add to that um I think it is true that many managers didn't seem to justify the 2 and 20 fees versus Bitcoin lately. Um but I I think that first you can totally have a barbell approach, right? where you can have part of your portfolio in a bitcoin where you're not paying a fee, you have liquidity, you have this blue chip growth, you're part of that, but you also have an actively managed piece of the barbell whether it's 9010, 8020, it's up to the group to decide, but that can be uh in in in smaller cap tokens. And I think the the understanding to add on to the discussion is that it's not just about security selection or token selection in in these contexts. It's much more uh understanding the macro regime uh cycle risk uh and and dealing with volatility. So for us, we will uh absolutely underwrite fantastic uh directional fundamental managers, but they'll hold a position for 10 years because they believe uh and they don't mind the vault. For us, we will we will exit that. We will rotate into uh a lower beta or a market completely neutral uh manager. uh and and I think that that when you look at that over the course of the cycle then suddenly when these big draw downs occur with with a bitcoin uh you don't you know you you're you're mitigating a lot of that and that's how it outperforms. So I think for a lot of groups there's this tension that's seen as like oh it's mutually exclusive but it shouldn't be seen that way there there's there's absolutely space for active and passive in in the portfolio. >> Yeah, I like this a lot. I like thinking about it in this barbell approach. And maybe if I take it one slight step further, I see Bitcoin is truly the um the asset within digital assets that's found product market fit so far. Then we have stable coins. Stable coins has arrived now that we have the Genius Act, now that we have $300 billion in market cap and you see all the competition there. And then we have this third bucket which is kind of everything else and we're still looking for this real product market fit across a number of different slivers. But in this technology which will ultimately be the backbone of the global economy we can see Pier I love your number 100 trillion in you know less than 10 years right if we get there I mean just think about that multiple from 4 trillion 25x um that's an incredible tailwind that pulls you know this this almost a secular growth story of this asset class so for me um when I think about differentiating managers who are are trying to beat Bitcoin if We're in this huge secular tailwind. There's a dis economy of scale with Bitcoin. It can't keep doubling. Um, but everything else, we don't we only have one asset that's worth a trillion dollars within digital assets. If we get to a hundred trillion, we're going to have many. So, there's an again going back to that asymmetry. There's going to be an asymmetry for the liquid token managers to find those um, you know, those venture-like liquid venture-like returns. So that's that's you know really important to me to have a balanced portfolio. And the final thing I'll say I love this secular growth story right this powerful beta this tailwind. Um but on top of that the thing that attracted me at the very beginning of my career and is still very um evident today is that there's alpha to be had. So you get this beta perhaps one of the best betas over the next decade in addition to the alpha and the alpha is there because there are a lot of um because there aren't a lot of institutions here trading very very professionally because there are a lot of retail investors who have a pension for leverage because there's fragmentation because it's a decentralized um uh market infrastructure with 300 different exchanges all over the world all of this leads to inefficiencies and all of this leads to alpha. So to conclude, I mean I see the beta story as powerful and the alpha story as powerful and combining them together um is perhaps one of the most powerful kind of investments you can find today >> for institutions who are entering the space who are uh just just sort of trying to figure out where to to jump in. How would you what what are your views on fund of fund investment opportunities versus directly investing with individual GPS? >> Yeah. Um maybe I'll go first. Uh I would say that um if you think about a little bit financial history uh and you look back to the 90s when this product was very popular uh in traditional finance there was good reason for it. Uh the space was very fragmented. Hedge fund managers took big bets and there were blowups, but there was also huge returns. And the idea of paying a double fee layer, which has long been the criticism of fund of funds, was was rendered mostly relevant because the performance was uh more than enough to offset that. And uh as the space has consolidated in in New York City, you have a few, you know, 12 massive massive funds with all the AUM. They make big management fees. they generally have very low V which means their returns are very low as well and that product breaks down in crypto you see the same conditions as in the '9s and I think for someone looking to get involved in the space beyond just concentration risk which is always the case when you're in one manager even if they're a macro manager that pays attention to cycle risk you still have the concentration risk I think um if you can find a group with scale that uh does does the work well and has high liquidity you know maybe they set up SMAs they have relationships with managers where they are they're big LPs so they have control over the accounts they have transparency in the accounts they don't have long redemption times you can have agility and that allows in a highall situation like this movement among different managers and so um I think the same conditions are in place today where you can have really really high conviction managers amazing performance and yes it's a double fee layer but part of that also gives you protections uh and access um that you wouldn't otherwise have. So I think it's a great way for institutions to think about uh making an expression into the asset class. >> And Pier, maybe I can add what I think is so funny in this space in the hedge fund world, people love these big multi-managers like the big millenniums and the citadels. Um but in fact, they're just internal fund of funds. There's also that extra layer of fees. Fund of funds almost need a rebranding a rebranding to be an external multi-manager fund. Yeah. >> Right. So it's you are paying fees but if the alpha is greater than those fees you can only eat your net returns right so I think that is like a big point and somehow you're exactly right so of course I'm very biased because I run a fund of funds so please take that with a grain of salt but if we look at this weekend and we see the the damage that happened imagine you were a small indominant foundation and you had mild conviction right you can't borrow conviction there but you had mild conviction you went into in digital assets and you completely blew up your investment committee saying wow we went to zero right so any um I think the very sophisticated digital asset investors will have many many pods and maybe they don't need this diversification across uh you know fund of funds but we need diversification across strategies we need diversification across ecosystems we need diversification across exchanges counterparty service providers because the one thing that crypto has taught of us is that there will be crises and this is not the last one we're going to see. Um and you know the one free lunch in finance is the diversification and I think you can if you can do it right and you can truncate the left tail risk by having enough experience to know you know the really obvious ones to avoid I think you do get that free ride of like the the tailwind. Um, and yes, again, I'm biased, but I think that fund to fund is a very very robust alpha that fits really well in in portfolios. >> Yeah, I think I I agree with what Pierre and Chris has said. It's always a question about breadth and the edge. The edge will come from specific managers. So, a bit like what we saw in the internet and the tech thing, you know, not every fund is a Seoa Capital or Andre Horovitz. But when you're at early stage, you have to have the breadth because everyone has similar risk. So you can use that to diversify in a fund of fund structure. You mentioned multistrat fund and we see that on the equity side you know how much they are building struggling and things are going on. So you always have that risk. I mean there's huge optionality. You do not have to take very specific risk because your upsides are big which means that you could lose all your capital on the downside if you get wrong. So I do think you have to have a combination of the breadth on the fund side and edge if you like a very specific project or if you know a very specific manager. I like people who have had long experience in cycles of managing macro things and then they're moving on the digital side because they bring that understanding of what can go wrong when interest rate change or the regime changes or or or the politics changes. So I think a very barbble approach like what Pierre mentioned initially is the good way to go if you are new to this asset class. >> Absolutely. Thank you. Do we have any questions? We have a a minute left that we might um be able to fill if anyone has anything to ask our allocators today. Anything else that we've we any last thoughts then on where we're at now with institutional allocators views on digital assets in 2025 and maybe views on 2026 and and beyond where you see sort of uh management of portfolios shifting next year. So purely from what's happening in the market, I can tell you that I'm extremely bullish on what's happening in the global world. And you always keep hearing about bubbles and market crashes. You know, the more skeptics you have, the more those things are not going to happen. Nobody talked about market crash in 1937 or 2007 and it happened. So I love when there's skepticism. You should really applaud the skeptics because that's good for your asset class. That's good for your business. It keeps the managers reigned in, the founders reigned in, the capital reigned in. But if you take that away and also on the rate cycle, where are we at this time? Fed is about to cut more rates. We saw some confirmation yesterday that they could be cutting rates twice. We still see GDP growth in US, which is absolutely stunning. So yes, you will have the fight between President Trump and President Xi over over social media, but you can ignore that and look at the real GDP growth and how things are building up. So I feel extremely positive in what's happening and which means that a lot of wealth is being generated and when wealth is generated it starts flowing into new projects. I mean a lot of what we have seen today comes goes back to QE when the capital become very cheap and some of that will be destroyed but a lot of that will also be used in a good way. So I feel extremely positive about where we are and we have a lot of opportunities ahead. >> I would just say really fast I think the asset class deserves an allocation after all the history where we are with regulation and policy market structure participation I think the answer is no longer zero. Yeah. And and my final thought truly is where we are with this monetary and fiscal debasement. Um we see gold at an all-time high. We see Bitcoin at an all-time high. The Fed is about to cut rates, add more liquidity. It's a setup for a revaluation of nominal assets. Um and as Bitcoiners like to say, it's not Bitcoin that's going up, it's the US dollar that's going down. It's fiat currencies that going down. There will only ever be 21 million Bitcoin. And if that's your starting point, just investing in digital gold in Bitcoin, you could do a lot worse. But there's so much more to the asset class as well. That's a great final thought. Please join me in thanking Chris, Pierre, and Manish.
The Allocator's Perspective on Digital Assets | DAS London 2025 | Day 3 | Main
Summary
Transcript
Hi everyone. I'm Sophia Horowitz. I'm a partner at LW3. Uh first of all, thank you Block Works for having us today. Um it's been a great event so far uh the last couple of days. Hopefully we can keep the energy up for this last panel on the main stage before launch the lunch break. Um so today we are focusing on the allocator's perspective on digital assets. Um over the past decade or so digital assets has really moved from the fringes to becoming a legitimate uh part of the conversation uh in institutions. So I guess I behind the scenes it is always the the allocators themselves um when it comes to digital assets who have been uh making the decisions really on and and and managing kind of how this asset class will be legitimized. So looking at how it's valued, uh how it's sized and managing uh its risks alongside traditional portfolios. Um so today I'm very pleased that we have three allocators with us who really sit at the heart of making those decisions. We have Chris Salars who's CIO of digital assets at Amitus Capital. We have Pierre Henri who is head of private investments at XPAN. Have I said that right? And then we have Manish Singh who is CIO at Crossbridge Capital. So for context uh to get started can we explain to everyone in the room a little bit about um your current roles and also give us a bit of um insight into how much of your time and your energy is spent on crypto. >> Let's start with Chris. >> Sure. Hi everyone. My name is Chris Solars. I'm CIO of Amitas Capital Digital Assets. We are a digital assets fund of funds um backed um and seated by uh family office here in London. Um I invest in venture capital uh and also liquid strategies including market neutral um and directional. Um and I guess my history with with um digital assets goes back about eight years and I have been an allocator to hedge funds for for 20 years now. And um one thing I've always appreciated is alpha um is the skill of kind of um eking out kind of that risk-free profit. And when I first saw cross exchange arb and in the early days we were making tripledigit type returns for me I didn't have to buy into the fact that these were an emerging technology. Um instead I was just kind of enamored by the fact that there was real alpha to be had. So that was kind of my entree into um into digital assets and I kind of joke that I I came for the arbitrage and I stayed for the technology. So so here I am today um and happy to be here. >> Thanks Chris. >> Hi. So uh I'm I'm Pierre. Uh I work at XPAM. We are a fund of hedge funds. All we do is digital assets and we're really a macro firm. So we we think about uh the full cycle, the full business cycle uh and uh invest in managers based off of that. Uh there I'm chief commercial officer and uh do uh our private investments and I started with um in 2016 I was a business school student at Stanford and we had all the technology coming through PaloAlto. So I learned about it there. I didn't really do anything. I had a traditional finance uh career before and then when COVID happened uh and like a fourth of all American dollars were printed in a month in history like markets were closed you say this isn't normal you start looking at gold real estate bitcoin things that are fixed in quantity and I went down the rabbit hole that way and basically we are uh very much uh looking at where to spend time and when you when you look at how assets have performed relative to inflation and debasement um it doesn't it's not as compelling right anywhere else you have uh you have exponential technology you have digital assets and so that that got me fully down uh this this career in industry so >> hi I'm Manish Singh I'm CI at crossbridgeidge capital most of what we do is on the traditional equity side unlike Chris and Pierre we are making small steps into that direction of moving on digital side we do get a lot of client query on what's happening in the digital business so for me, how did I get into digital world? The oldfashioned way, you know, first being a critique, not accepting it. I remember my friend Kelly, she mentioned to me to buy Bitcoin at $400. I didn't buy it. That was many years ago. Big mistake. So, you learn from that. So, we are seeing a lot of people on the traditional asset side who now understand that something new is being built up and you need to be part of that. So, we are not actively pushing it, but when we get more query, you have to be prepared to answer those questions. And how are each of you uh thinking about digital assets in a broader macro and in a portfolio construction context right now? Should we start with Chris? >> Yeah, sure. Well, maybe my my favorite part about digital assets is the positive asymmetry and the positive skew and what it can add to portfolio from a portfolio construction concept. Um, so I kind of start there, you know, and as a as a student of the markets, um, and as someone who's built portfolios over the years, we would typically talk about gold having positive skew and trend following strategies as positive skew. And that's so complimentary kind of it punches above its weight as an added component within within a diversified portfolio. And of course, that offsets emerging markets and credit which have this this negative skew. So I love digital assets for many reasons. one is that it has just you know tremendous upside potential and two that it's kind of more accretive uh per unit than um than anything else you can add to the portfolio right now. >> Right. So again we are a macro group I I have the privilege of working with a guy called Ral Pal who many of you will know every day and our view is uh that this is one of the great exponential technologies of our lifetime. So the whole space it's about 4 trillion. We we say within you know probably by 2032 it'll be at 100 trillion. And you again if you look at um where a global hurdle rate is for investment performance which is to us this whole debasement trend and and inflation uh not a lot beats that. It's basically some parts of the NASDAQ and you know AI and this digital assets. Uh so we actually think that this whole cycle is quite similar to 2017 and uh it's it's right translated so basically it's extended and so we think that uh you're going to see this debt maturity which is now so famous in the US that the government cannot pay for a huge amount which is based off of a 5-year or less term structure is going to mature and it needs to be paid for and so you're going to see monetization uh you're going to see we think a recovery in the ISM above the level 50 uh over into 2026 and it's still a high beta play on global liquidity. That was what drives this this asset class. So for us um uh that's firmly in place and so we're we're positioned for that and and we think that these managers uh are are the best way to express that view. >> Yeah, I would add to what Chris mentioned. You know, there's a high optionality in what's going on and you can't access that in the listed market. So you do have Coinbase or Circle IPO and there are a few others coming up. But like anything you know people who came early in the railroad business they went bankrupt and now they build the whole world and old economy around it. So so you will have the skeptics and you will have your gains and losses but this is the great asymmetric opportunity you have which you need to have access and have in the portfolio. So I see this as we are beyond the meme phase. Meme phase is over. This is more like a building phase putting the plumbing down building the infrastructure. So just like when you had the.com bubble burst in uh everyone thought the internet was over. I mean we have people like Paul Krugman who said internet is a fad. Look where we are today. So I think we at a stage where the the Googles and Amazons of this world are being built up and you have to be part of that and sometimes you do not get access to that in in the listed market as I said but they will have a place in the portfolio. You see on the banking side, we had the bank earnings yesterday and you heard Jamie Diamond and everyone else talk about what's going on. I believe that they will be running a much smaller enterprise. That doesn't mean the stocks are going to go down. I think banks are going to turn into tech company. They will get valued as a tech company. Not your 20 25p maybe 40 50p because they will have much more growth and earnings. So from a traditional point of view, I think you're coming where these things are going to merge and you're going to start looking at. So either you can get into it now through private business or fund for everything else or you're going to buy that enlisted market. You'll still do well because you know look at what happened to Nvidia over last two year let alone last five years. So there's a there's huge asymmetric optionality of something being built and you cannot ignore it. All of us see and have spent time with probably hundreds. Chris, I think for you and maybe for Pierre, it could be in the thousands of crypto managers um over your careers. Um what I think everybody in here is probably interested to know. What are the most compelling, the most interesting things that these managers are focusing on right now that spark your interest? >> Um this is a great question. Um and maybe I'll take it in three parts. Um because I really see the um crypto asset management universe in three different silos. Um so we have crypto market neutral and we had probably the best stress test we've ever had um over this weekend. Um and we're finding out a few that um you know that were wiped out that were part of the 1.6 million uh trading accounts that were liquidated. So we really found out you know as Warren Buffett says when the tide goes out who is swimming without a bathing suit. Um so risk management was very very important. Um so so look the the market neutral managers the opportunity set is still there. I think right now perhaps more than ever more than one week ago because um you know the leverage has down we've kind of been reset and after these big storms whoever is left with uh with with deployable capital is in a really good position going forward. So that's very exciting. I think within liquid directional these are longbiased generally longbiased uh token pickers um and what they're trying to do is um to really outperform Bitcoin um outperform a long biased index um so they see a lot of different um you know their portfolios can really really range I think the most exciting thing there is finally um since the beginning of this year um since we had regulatory change in the US we're seeing these managers really lean into tokens with real revenues with real fundamentals. Um they can almost apply an equity-like discounted cash flow um to future earnings. So we see you know tokens uh layer ones like salana and bitcoin but tokens like hyperlquid um and aerodrome and maple syrup that are really you know cash flow positive like that is kind of what is uh the biggest theme I see there and then in venture um I think venture has been a little bit tough on the asset raising um because of the cycle that we've been in these last few years we haven't seen a lot of DPI and that's kind of a challenge but it's just as exciting on the preede and seed side because there's a lot of exciting things there being built uh for the future. So I see opportunity across all three verticals. >> Yeah, I thought that was a great answer and I echo a lot of that. I think that um for the whole market cap of the space to get to 10 trillion, you need institutional investment and it still hasn't really come and what is going to compel those groups it it has to be real fundamentals that can be underwritten at an IC and withstand scrutiny over time. And so, uh, the protocols that were mentioned by Chris are great examples of that. Over the weekend, they often perform better than their centralized counterparts, which is a I think it's really compelling for people to say, I need to pay attention to this. Um, and uh, in general, I think what I would add is the other big trend this year has been this DAT phenomenon. Uh and basically uh the market structure right now is that people can invest in Bitcoin and Ethereum through an ETF and the wider ecosystem is still not really available. Some groups can't even through their mandate invest in spot or even the ETF. And so this was an opportunity to maybe form a bullish expression of of a particular protocol. And I think that the largest ones have worked very well because they actually uh have been diligence by these groups. And so again, it goes back to this idea that something needs to be familiar. you have to defend valuation with something like cash flow or some sort of sustained adoption that people can get comfortable with. As we see more of that, um I think that you're going to see more and more uh participation and some of these subscale DATs if they're not having these commercial partnerships and announcements that lead to those things. Um I think it's I think it's going to it's going to be difficult over time. So but but echo what Chris said beyond that. Yeah. >> Yeah. Just to add to what Chris said, you know, and and the tide goes out a lot in crypto world. So you have to be very careful about who you're working with as we saw on the weekend. But if you again look from the the traditional equity background, if you look at the back offices of big banks, you know, in trade settlement in intermediation that they do, I mean that is going to change a lot over time. And so DAT is a good example of what's happening. But then we heard from I think the the rep from JP Morgan on the panel yesterday and other people what's happening. So to me you are really addressing that part of the industry the big part now still if you talk about a bond issuance on chain which is still more like a PR thing than the real thing because there's still a back office trying to reconcile what settlement has happened so so we really haven't seen the big move in it. So I I still think that we are very early in what we are seeing but you're going to see real use case in industry real use case in banking. So you're seeing a a new monetary framework is being built up and while some people might be getting bullish on gold but you know there's something else happening and this is not your grandfather's gold this is something else which is being built around and and you really need to be part and understand what's going on or else you're going to get left out and with a digital framework and decentralization and trade and defi and everything that's happening you have a real framework is being built in front of you right in front of you with new and big winners. So when I see projects so people are working on tokenization tokenizing unit assets and if you look at the case of uh Black Rockck uh and what they are looking to do with their fund business, real estate business, you really have a big future being built up and this is coming from people who who didn't believe in blockchain or didn't didn't believe in these things. You can go and Google their videos from two three years ago where they didn't believe in this. And then you have people like Peter Schaef and I I saw a video last night of a guy who was banging about blockchain when it was $4,000 and Peter Schiff was ridiculing him. And yes, Peter Schiff is right on gold which is at $5,000. But look where Bitcoin has gone to at the same time. People are excited about silver has gone to all-time high. It took 40 years to go back to that all-time high. That's not how long it takes Bitcoin and everything else to go. So you can be skeptic and miss out on everything or you can take an interest and learn. And this is where given my equity background, I do a lot of structured equity trade. I see the optionality. I see a huge asymmetric option optionality in what is being built around us. Just touching on um some of the points you made there I guess Manish um in 2024 last year very few managers managed to outperform Bitcoin. How are you thinking about uh manager selection uh now and you know it can't really necessarily be based entirely on on track record obviously. >> Sure. So I always say it's easy to write the bull market. you know I you look for bears who can surf properly not not the bull market anyone can ride that and we saw that and it's also not about just one year because one year can just be a matter of luck what you really need is over cycles because it's not about having an exposure it's about sizing the trades I say this to everyone all the time you can copy my trade I'll tell that to you but you can't copy my conviction you can't copy how I'm going to risk manage it so when you're looking for managers manage selection don't go by just the track record of last year or the year before. You really have to understand the philosophy of how they look at investment, how they look at the world. To me, that is a big part of due diligence than somebody just beating because you got lucky on a trade or you had leverage on a trade. So you have to see over cycles when you're selecting a manager. I mean we are not doing manager selection on digital side because we are not as big on it. So we're getting exposure in a different way. But if you are doing manual selection on digital side to me that would be the first thing. So everything that we have learned on the traditional asset side is going to stay. It's just that you're going to apply the same risk measure and mentality on the digital sides. But the philosophy doesn't change how you look at risk or how you should size a trade. That should never change. And the people who use leverage on the weekend on a trade that already has a huge optionality found out what it does to you because there's already an option built in. So you already have a leverage. You don't need to go and lever again. So this fundamental understanding is very very important who's managing your money and who you're trusting your assets with. >> Yeah, maybe to add to that um I think it is true that many managers didn't seem to justify the 2 and 20 fees versus Bitcoin lately. Um but I I think that first you can totally have a barbell approach, right? where you can have part of your portfolio in a bitcoin where you're not paying a fee, you have liquidity, you have this blue chip growth, you're part of that, but you also have an actively managed piece of the barbell whether it's 9010, 8020, it's up to the group to decide, but that can be uh in in in smaller cap tokens. And I think the the understanding to add on to the discussion is that it's not just about security selection or token selection in in these contexts. It's much more uh understanding the macro regime uh cycle risk uh and and dealing with volatility. So for us, we will uh absolutely underwrite fantastic uh directional fundamental managers, but they'll hold a position for 10 years because they believe uh and they don't mind the vault. For us, we will we will exit that. We will rotate into uh a lower beta or a market completely neutral uh manager. uh and and I think that that when you look at that over the course of the cycle then suddenly when these big draw downs occur with with a bitcoin uh you don't you know you you're you're mitigating a lot of that and that's how it outperforms. So I think for a lot of groups there's this tension that's seen as like oh it's mutually exclusive but it shouldn't be seen that way there there's there's absolutely space for active and passive in in the portfolio. >> Yeah, I like this a lot. I like thinking about it in this barbell approach. And maybe if I take it one slight step further, I see Bitcoin is truly the um the asset within digital assets that's found product market fit so far. Then we have stable coins. Stable coins has arrived now that we have the Genius Act, now that we have $300 billion in market cap and you see all the competition there. And then we have this third bucket which is kind of everything else and we're still looking for this real product market fit across a number of different slivers. But in this technology which will ultimately be the backbone of the global economy we can see Pier I love your number 100 trillion in you know less than 10 years right if we get there I mean just think about that multiple from 4 trillion 25x um that's an incredible tailwind that pulls you know this this almost a secular growth story of this asset class so for me um when I think about differentiating managers who are are trying to beat Bitcoin if We're in this huge secular tailwind. There's a dis economy of scale with Bitcoin. It can't keep doubling. Um, but everything else, we don't we only have one asset that's worth a trillion dollars within digital assets. If we get to a hundred trillion, we're going to have many. So, there's an again going back to that asymmetry. There's going to be an asymmetry for the liquid token managers to find those um, you know, those venture-like liquid venture-like returns. So that's that's you know really important to me to have a balanced portfolio. And the final thing I'll say I love this secular growth story right this powerful beta this tailwind. Um but on top of that the thing that attracted me at the very beginning of my career and is still very um evident today is that there's alpha to be had. So you get this beta perhaps one of the best betas over the next decade in addition to the alpha and the alpha is there because there are a lot of um because there aren't a lot of institutions here trading very very professionally because there are a lot of retail investors who have a pension for leverage because there's fragmentation because it's a decentralized um uh market infrastructure with 300 different exchanges all over the world all of this leads to inefficiencies and all of this leads to alpha. So to conclude, I mean I see the beta story as powerful and the alpha story as powerful and combining them together um is perhaps one of the most powerful kind of investments you can find today >> for institutions who are entering the space who are uh just just sort of trying to figure out where to to jump in. How would you what what are your views on fund of fund investment opportunities versus directly investing with individual GPS? >> Yeah. Um maybe I'll go first. Uh I would say that um if you think about a little bit financial history uh and you look back to the 90s when this product was very popular uh in traditional finance there was good reason for it. Uh the space was very fragmented. Hedge fund managers took big bets and there were blowups, but there was also huge returns. And the idea of paying a double fee layer, which has long been the criticism of fund of funds, was was rendered mostly relevant because the performance was uh more than enough to offset that. And uh as the space has consolidated in in New York City, you have a few, you know, 12 massive massive funds with all the AUM. They make big management fees. they generally have very low V which means their returns are very low as well and that product breaks down in crypto you see the same conditions as in the '9s and I think for someone looking to get involved in the space beyond just concentration risk which is always the case when you're in one manager even if they're a macro manager that pays attention to cycle risk you still have the concentration risk I think um if you can find a group with scale that uh does does the work well and has high liquidity you know maybe they set up SMAs they have relationships with managers where they are they're big LPs so they have control over the accounts they have transparency in the accounts they don't have long redemption times you can have agility and that allows in a highall situation like this movement among different managers and so um I think the same conditions are in place today where you can have really really high conviction managers amazing performance and yes it's a double fee layer but part of that also gives you protections uh and access um that you wouldn't otherwise have. So I think it's a great way for institutions to think about uh making an expression into the asset class. >> And Pier, maybe I can add what I think is so funny in this space in the hedge fund world, people love these big multi-managers like the big millenniums and the citadels. Um but in fact, they're just internal fund of funds. There's also that extra layer of fees. Fund of funds almost need a rebranding a rebranding to be an external multi-manager fund. Yeah. >> Right. So it's you are paying fees but if the alpha is greater than those fees you can only eat your net returns right so I think that is like a big point and somehow you're exactly right so of course I'm very biased because I run a fund of funds so please take that with a grain of salt but if we look at this weekend and we see the the damage that happened imagine you were a small indominant foundation and you had mild conviction right you can't borrow conviction there but you had mild conviction you went into in digital assets and you completely blew up your investment committee saying wow we went to zero right so any um I think the very sophisticated digital asset investors will have many many pods and maybe they don't need this diversification across uh you know fund of funds but we need diversification across strategies we need diversification across ecosystems we need diversification across exchanges counterparty service providers because the one thing that crypto has taught of us is that there will be crises and this is not the last one we're going to see. Um and you know the one free lunch in finance is the diversification and I think you can if you can do it right and you can truncate the left tail risk by having enough experience to know you know the really obvious ones to avoid I think you do get that free ride of like the the tailwind. Um, and yes, again, I'm biased, but I think that fund to fund is a very very robust alpha that fits really well in in portfolios. >> Yeah, I think I I agree with what Pierre and Chris has said. It's always a question about breadth and the edge. The edge will come from specific managers. So, a bit like what we saw in the internet and the tech thing, you know, not every fund is a Seoa Capital or Andre Horovitz. But when you're at early stage, you have to have the breadth because everyone has similar risk. So you can use that to diversify in a fund of fund structure. You mentioned multistrat fund and we see that on the equity side you know how much they are building struggling and things are going on. So you always have that risk. I mean there's huge optionality. You do not have to take very specific risk because your upsides are big which means that you could lose all your capital on the downside if you get wrong. So I do think you have to have a combination of the breadth on the fund side and edge if you like a very specific project or if you know a very specific manager. I like people who have had long experience in cycles of managing macro things and then they're moving on the digital side because they bring that understanding of what can go wrong when interest rate change or the regime changes or or or the politics changes. So I think a very barbble approach like what Pierre mentioned initially is the good way to go if you are new to this asset class. >> Absolutely. Thank you. Do we have any questions? We have a a minute left that we might um be able to fill if anyone has anything to ask our allocators today. Anything else that we've we any last thoughts then on where we're at now with institutional allocators views on digital assets in 2025 and maybe views on 2026 and and beyond where you see sort of uh management of portfolios shifting next year. So purely from what's happening in the market, I can tell you that I'm extremely bullish on what's happening in the global world. And you always keep hearing about bubbles and market crashes. You know, the more skeptics you have, the more those things are not going to happen. Nobody talked about market crash in 1937 or 2007 and it happened. So I love when there's skepticism. You should really applaud the skeptics because that's good for your asset class. That's good for your business. It keeps the managers reigned in, the founders reigned in, the capital reigned in. But if you take that away and also on the rate cycle, where are we at this time? Fed is about to cut more rates. We saw some confirmation yesterday that they could be cutting rates twice. We still see GDP growth in US, which is absolutely stunning. So yes, you will have the fight between President Trump and President Xi over over social media, but you can ignore that and look at the real GDP growth and how things are building up. So I feel extremely positive in what's happening and which means that a lot of wealth is being generated and when wealth is generated it starts flowing into new projects. I mean a lot of what we have seen today comes goes back to QE when the capital become very cheap and some of that will be destroyed but a lot of that will also be used in a good way. So I feel extremely positive about where we are and we have a lot of opportunities ahead. >> I would just say really fast I think the asset class deserves an allocation after all the history where we are with regulation and policy market structure participation I think the answer is no longer zero. Yeah. And and my final thought truly is where we are with this monetary and fiscal debasement. Um we see gold at an all-time high. We see Bitcoin at an all-time high. The Fed is about to cut rates, add more liquidity. It's a setup for a revaluation of nominal assets. Um and as Bitcoiners like to say, it's not Bitcoin that's going up, it's the US dollar that's going down. It's fiat currencies that going down. There will only ever be 21 million Bitcoin. And if that's your starting point, just investing in digital gold in Bitcoin, you could do a lot worse. But there's so much more to the asset class as well. That's a great final thought. Please join me in thanking Chris, Pierre, and Manish.