Why should I invest into Apex Token Fund, a Fund-of-Hedge Funds?
Apex Token Fund is the first of its kind, a tokenized Fund-of-Fund investment model for crypto-currency.
For starters, I do not work for Apex Token Fund, I am just a Financial major interested in crypto. This isn’t investment advice.
I will use this medium post to hopefully explain what Hedge Funds are and why they are great for your investment portfolio - illustrating the risks and rewards.
Firstly, what are hedge funds?
Hedge funds are defined as actively managed investment vehicles, usually restricted to institutional investors (i.e. high net worth individuals & a minimum investment of $1 million) due to the greater amount of associated risk.
An actively managed fund means they want to out-perform the underlying index, for example, out-perform bitcoin. Whereas a passively managed fund, just follows the underlying index, for example, the fund just tracks the top 20 crypto investments.
Hedge funds get their name from the practice of ‘hedging’ the associated risks of positions held within the fund. What this means is that they may bet on the rise and fall of stock or tokens, essentially gaining on both price movements, thus negating any risk.
To put it in crypto terms - let’s say for example token XYZ is rumored to release a working Mainnet for cat-coins. Token ABC was delayed with their Mainnet and may not release their Mainnet if XYZ is successful. Knowing this information, the hedge fund will go long, or buy, XYZ because of this rumour while at the same time short, or sell, token ABC.
In the above scenario, the hedge fund will make money on both the rise of XYZ and fall ABC tokens. These sort of positions are very risky and such trades are not always available to personal investors.
Secondly, why is an active fund better?
Actively managed funds need to out-perform the market to get paid. The fee structure is usually quoted as 2/20. This means that the performance of the fund needs to beat a set benchmark to receive any performance fees. For example, the benchmark could be 10% more than the return on bitcoin, and therefore the fund manager will not be paid unless he out-performs. Furthermore, high watermarks are usually set to ensure that when bitcoin has negative returns, the fund still needs to reach a minimum return of 10% to get paid.
So therefore, hedge funds need to make money in both bull and bear markets, else they will not get paid. This is essentially why you pay the performance fee, you want to beat the market.
The performance fee for Apex is only 15%, where tokens are set aside to cover the performance fees of the underlying funds. More information can be found on their site — https://www.apextokenfund.com/fees
How else do hedge funds trade?
Hedge funds trade different strategies, the above bet is called a “long-short” or “event-driven”, others methods include arbitrage, where managers look for mispriced tokens on various exchanges. Most investors do not have various tokens spread across multiple exchanges, and buy the time the mispricing is noticed transferring tokens from one exchange to another is too costly to make any money. Funds also trade leveraged positions.
Another advantage of hedge funds is being able to invest in private presale ICO’s. These presales are usually heavily discounted, and carry a lot risk, with an exponential reward.
Can’t I just hold bitcoin?
Yes, you could, but if you don’t sell at the peak of the market, your just hodl’ing. How about those times when you jump out of a coin, and within hours it moons. Sometimes it’s like the market knows and is against you. — Leave it to the experts, the market makers not market takers.
Do you have any proof of out-performance?
Due to fewer regulations, hedge funds are not required to publish returns to non-investors, and therefore, finding information online can be difficult. I will provide you will some tidbits to help you with your research.
An average of multiple hedge funds performance per index -
https://www.barclayhedge.com/research/indices/cryptocurrency/cryptocurrency-index.html
https://www.hedgefundresearch.com/family-indices/hfr-blockchain#
Compare this to the performance of bitcoin -
What about the performance of the hedge funds associated with Apex?
Hopefully these links will help you out -
Multicoin Capital — I cannot find any performance reports, this might help though → https://blog.nomics.com/flippening/crypto-hedge-funds-multicoin-capital-w-kyle-samani-episode-0002/
Pantera Capital — 25000% since 2013. Apparently, Apex is investing into Pantera’s ICO hedge fund. https://www.nytimes.com/2017/12/19/technology/bitcoin-hedge-fund.html
Brian Kelly Capital — https://www.cryptoninjas.net/2017/05/11/bk-capital-digital-asset-fund-68-april-now-172-ytd/
Cambridge Capital — Hedge fund managed by Apex Token CIO, Ari Nazir. Ari’s and Chris Keshian’s (CEO) previous fund Neural Capital was a big success, and one of the funds within Protocol Ventures Fund-of-funds (another fund is only open to institutional investors). https://blog.nomics.com/flippening/sentiment-momentum-investing-ari-nazir-neural-capital/
Crypto Hedge Funds: Who Has The Winning Formula? @ TOKEN2049 https://www.youtube.com/watch?v=eR17nn0lg5E → including Alex Sunnarborg (Founding Partner at Tetras Capital) & Ari Nazir
What’s so good about Apex?
For me, it’s the exposure to an investment usually reserved for the top 1%. This is a great opportunity to actually be allowed to invest in some profitable funds.
Secondly, it’s the diversification - Apex has done a wonderful choosing hedge funds from all around the world, each with their own investment strategy. This broad exposure will ideally provide uncorrelated returns.
Thirdly, it’s the community I have experienced on Telegram. I think all of the investors really believe in this model and are all like minded. Everybody understands the opportunity cost of not being involved with hedge funds.
Uncorrelated returns?
This means that when hedge funds are combined within your investment portfolio, your overall portfolio risk is lowered while increasing portfolio returns. If you want to know more, Google Sharpe ratio and hedge funds.
Research shows that 10–20% of portfolio value allocated to hedge funds yields the greatest returns. (http://docs.edhec-risk.com/EHFD-2006B/doc/Analysis%20HF%20Perf.pdf)
What about the risks?
- The major risk is that cryptocurrencies may go to zero.
- Apex fee structure of $3 million management fee — Apex may use the returns from the presale investors to offset the $3 million if the soft-cap isn’t reached. It should also be noted that this $3 million fee is the maximum amount; the true value will be determined at the close of sale and this may value well be less than the quoted $ 3million. The team is very confident the soft-cap will be reached. This is a great opportunity for mom and dad investors, real exposure to actually hedge funds.
What’s the expected return?
This is difficult to predict. Most analysts are predicting a crypto market cap of $5–6 trillion by 2020. Its currently at $450 billion, so that’s 11 times…
What now?
- Jump on over to → https://www.apextokenfund.com/
- Read over the whitepaper
- #doyourownresearch (hopefully the above page and links will help)
- Join their Telegram community
- complete the KYC → https://medium.com/apex-token-fund/how-to-complete-the-apex-token-fund-kyc-process-755b733aacd5
- Invest via BTC, ETH, XLM or USD.
Other Relevant Links?
Enjoy & let me know what you think. Remember that past performance is not an indication of future performance.
