Bermuda-based crypto capital markets firm CrossTower is launching a hedge fund later this month to compete with Grayscale’s Bitcoin Trust (GBTC) and other Bitcoin funds for accredited investors.
Much like Tesla’s boom generated greater demand for electric vehicle stocks, GBTC’s success with $ 20 billion (AUM) of assets under management has generated a ton of cash, said crypto analyst Kevin Rooke. (Grayscale is owned by the Digital Currency Group, the parent company of CoinDesk.)
Most recently, crypto lender BlockFi registered a Bitcoin trust with the US Securities and Exchange Commission, and Bitwise has announced that it will seek regulatory approval to publicly trade its Bitcoin fund’s shares on an over-the-counter market, similar to how it did on the secondary market of GBTC.
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The CrossTower Bitcoin Fund does not trade on a secondary market but seeks to compete on management fees and liquidity.
The fund charges a management fee of 60 basis points, or 0.6%, versus GBTC’s 2% management fee, said CrossTower co-founder and president Kristin Boggiano. It is traded at the net asset value (NAV) of Bitcoin and has no lockups, allowing investors to cash in within a day.
“This is the purest vanilla of the range of offerings that we expect to be popular,” said Boggiano. “At CrossTower we are building an infrastructure so that companies who want to manage their risk have different instruments, regardless of whether they want to use an exchange, whether they want a loan or not.”
The minimum investment is $ 100,000 and CrossTower has an AUM of $ 20 million to start with. Boggiano added that the product had the most interest from family offices.
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“This is definitely a huge benefit for family offices,” said James Seyffart, ETF research analyst at Bloomberg Intelligence, on the fact that the fund is not locked. “It is very unusual for a fund structured in this way to offer daily liquidity.”
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However, the initial AUM is at the lower end of the current offerings in the market, Rooke said. In late January, a Canadian investment firm completed an IPO for its crypto fund on the Toronto Stock Exchange for $ 180 million.
CrossTower has hired Grant Thornton as the accounting firm for the fund, the law firm Apex as the administrator, and Anchorage as the custodian. (The fund pays custody and legal fees, Boggiano said.)
This is also a way for US investors with offshore accounts to get exposure to bitcoin from overseas tax havens.
The fund is only offered to accredited investors and has a traditional master-feeder structure. This is an investment vehicle that CrossTower can use to raise capital from investors in the US and around the world. Non-US companies and companies with offshore companies can use the Master Fund to invest in a US tax-free environment.
The fund is limited to 99 US investors but is open to daily redemptions to an unlimited number of offshore investors due to the structure of the fund, Boggiano said. Other, more capital-intensive fund structures in Bermuda would allow CrossTower to break into more of the US market.
Originally published February 3, 2021, 6:05 p.m.