Investor stories: Rockaway Blockchain Stable Fund invests through Credix
At Credix we’re determined to provide our LPs and underwriters the best risk-adjusted returns, onboarding continuously high quality non-bank loan originators in emerging markets who follow our due diligence and stringent underwriting policy. Especially during stressed macroeconomic environments, understanding the underlying assets’ performance and the legal and operational structure are key factors we double down on.
We’ve invited Adam Bilko, portfolio manager at the Rockaway Blockchain Fund, to share their rationale behind investing in EM through Credix. This is what he had to say…
What is the Rockaway Blockchain Stable Fund?
Rockaway Blockchain Stable Fund (RBSF) is an open-ended fund investing in DeFi and CeFi. RBSF helps DeFi protocols grow traction by providing liquidity and also provides loans to market makers and other asset managers while producing a stable and predictable annual return for investors that beats inflation.
Did you previously have exposure to EM financing opportunities?
While it has long been possible to invest in emerging markets with bonds through traditional finance, lending through the Credix platform is the first time investors could allocate to this asset class directly through DeFi. This gives us an opportunity to diversify our portfolio beyond developed markets while adhering to our risk management policies.
Given the elevated macroeconomic risks associated with investing in emerging markets, it is even more important that we perform our own due diligence. With every borrower, we have to carefully examine their financial statements, predict the vulnerability of their business models to potential risks, and evaluate their use of our capital. Through this process we are actively communicating with the Credix team, which has always been very helpful since they also perform due diligence on borrowers on the platform. Even though evaluating loans in emerging markets is not fundamentally different from evaluating other types of loans, we apply these procedures to sufficiently mitigate risk for our investors.
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How do you compare DeFi to TradFi lending models?
As new technology enables new business models, there is an important difference: in TradFi, we enter into ‘traditional’ paper-based loan agreements, while in DeFi the agreements are executed in a smart contract.
Since this reduces certain risks and eliminates the usual costs associated with intermediaries, protocols are able to allocate additional resources to adoption and growing community, and aligns our interests in the growth of the protocol.
This also makes the DeFi model much more transparent and facilitates nearly direct engagement between borrowers and lenders. Lenders can also see where their funds go, thanks to the transparency of the blockchain. Compared to TradFi, where the use of funds can be harder to trace, DeFi’s model allows us to assess risk more precisely.
How has been your experience working with Credix so far?
We’ve so far had a very constructive engagement working with Credix. The team is very responsive, and it is clear they benefit from years of experience working in this space.
We are also pleased with the quality of borrowers on the platform. Unlike on similar platforms, we believe the underlying economics of the borrowers’ businesses are sound and able withstand potential economic headwinds.
What’s your outlook for what’s to come?
With dramatic changes in global monetary policy, this will present challenges to all geographies, sectors and asset classes. We are already seeing the initial impact of this in equity markets, and crypto is no exception.
Though this environment will be challenging, it also presents opportunities, especially for funds and protocols which have prioritized appropriate risk management and mitigation policies, as speculative projects with no useful functionality will likely not survive.
We think this is particularly true of protocols like Credix, since they are attracting higher quality borrowers and lenders. For liquidity providers like us, we believe yields will rise as artificial suppression of borrowing rates is removed. That makes us very excited about the opportunities going forward.
Leave a quote: trust less, more due diligence perform <(°.°)>
