BH Digital, the unit that oversees the bulk of Breven-Howard Asset Management’s cryptocurrency trades, can even rank higher than traditional hedge fund strategies in terms of annual fundraising. One source said that by the standards of digital assets – given that the overall market capitalization is much lower – this is an “absolutely huge” result. What’s more, according to another source, early performance has outpaced the competition.
According to the source, the Brevin-Howard Digital Assets Multi-Strategy Fund lost only 4% to 5% from its inception to the end of June — even after the collapse of Terra’s UST stablecoin and the flat-out bankruptcy of cryptocurrencies like Celsius and Voyager. Under the blow, price action and liquidity are also locked in their respective “death” vortexes.
“Their returns, relative to the market, have been incredible,” one source said. The sources were granted anonymity to discuss sensitive business deals. A spokesman for Brevin declined to comment.
The firm takes a multi-manager and multi-strategy approach, putting LPs’ capital to work through venture-style gaming and liquid cryptocurrencies. As previously reported by Blockworks, more than 60 employees are in charge of BH Digital’s operations, up from 25 employees in January.
Strategies — including quantitative trading and relative value play — are implemented by teams of portfolio managers with supporting analysts and engineers in so-called “pods.” Additionally, the department now has over 20 external blockchain engineers working full-time.
This is the biggest commitment to cryptocurrencies by a traditional financial asset manager to date. Global macro-focused Bravin Howard Asset Management has total assets of approximately $23 billion across various asset classes.
The scope of the pricey nascent business reflects founder Alan Howard’s long-standing entrenched bullishness on digital assets, even as Howard has stepped back from day-to-day oversight. His family office has invested heavily in a string of now-high-profile cryptocurrency startups, including Polygon.
BH Digital hasn’t fully deployed its capital — perhaps part of the reason for its relatively strong performance — but its portfolio managers have clearly invested heavily.
One source said there is “not enough liquidity” in the market right now to “deploy a $1 billion liquidity strategy” unless it’s a “normal” approach, including long-term and trend-following strategies.
The fund will have an initial capacity of $1.5 billion, executives focused on cryptocurrency business development told investors. But that cap is expected to rise soon as the sector adds investment professionals and introduces new strategies to the market.
The Brevin-Howard Digital Asset Multi-Strategy Fund remains open to outside capital, subject to a minimum $5 million check. Its limited partners include some of the largest and most sophisticated hedge fund investors in the world, including entities that have historically backed only traditional financiers.
“That’s the thing about Brevin: (LPs) haven’t touched cryptocurrencies with a 10-foot pole, they trust them,” a source said. “It hardly matters that they are an unproven new product. If I were a donor, who would I trust? One of the smartest macro people in the world? Or a crypto native who doesn’t understand my language ?”
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The fund’s current assets do not appear to reflect proprietary capital provided by BH Digital partners or Howard himself.
These two funds could significantly alter the actual volume of transactions in the sector. The company is known to have committed at least a few hundred million dollars — possibly more — of its own cash to the effort.
When it comes to private games, the tool imposes a cap of 50% of an investor’s total portfolio. Investors’ returns have always been affected by the companies they backed, which shifted their exposure to risky stocks. Venture capital now accounts for less than 10% of the entire portfolio.
Before the cryptocurrency crash, Brevin Howard Asset Management remained largely on the sidelines of venture capital, wary of sky-high valuations and unwilling to compete with big names like Andreessen Horowitz (a16z).
Overall, that caution appears to have paid off, with Braven-Howard Asset Management now actively backing startups at more attractive valuations.
While there are a number of funds overseen by digital asset-focused investment managers that now have more assets under management, no known offerings come close to surpassing the total raised by Braven-Howard Asset Management.
