is behind Australia's top-performing hedge fund -
- 26th September 2017
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T-shirt sits on a desk at Bitmain Technologies's headquarters
in Beijing, China. Bitmain is one of the leading producers
of bitcoin-mining equipment and also runs Antpool,
a processing pool that combines individual miners
from China and other countries, in addition to operating
one of the largest digital currency mines in the world.
by Jonathan Shapiro
top-performing hedge fund in over one year is on the
bitcoin trade even though its portfolio manager is
not a "long-term believer".
Warburton of $20 million Perth-based Warburton Global
Macro Fund says the firm has made a tidy profit trading
the spread between bitcoin prices in North America
and Europe and Asia where the crypto currency frenzy
has taken hold.
got onto bitcoin quite early before the institutional
guys got there and were able to pick up a spread between
the different exchanges," he told The Australian
a six-week period the fund was buying bitcoin in Europe
and the US and then selling it in Asian markets where
demand, and therefore pricing, was higher.
shows you the psychology of different nationalities
and geographic locations," said Warburton, who
said the fund captured a 6 per cent spread and added
about 5 percentage points to the fund's returns.
Warburton said the fund held a long position in bitcoin
heading into the so-called "fork" where
bitcoin was divided into traditional bitcoin and bitcoin
cash, where transaction speeds could be improved.
transaction costs have skyrocketed so unless you are
willing to pay a large amount of money transfers can
take hours through to days."
we were getting 6 to 8 per cent spreads we were prepared
to pay a big premium to get our trades done at the
speed of an email, but it's just become so congested."
25 million people own Bitcoin but Warburton says most
"are hoarders" that treat their holdings
as a store of value rather than actively trading it.
very sentiment driven. I don't think it will ever
become a medium of exchange it will become
like quasi gold."
is too volatile to trade, he says, but "if you
are going to take a fundamental view on the crypto-currency
it would be whether it's going to cannibalise the
says the fund has spent time meeting market players
in London but also trawling through social media to
engage with sceptical programmers to get a holistic
view on the space that is captivating, infuriating
and confusing traders.
investors have largely sat on the sidelines as the
crypto currencies have taken off, with the exception
of former Fortress macro trader Mike Novogratz who
was reported to have put 10 per cent of his net wealth
is a risk the bitcoin community tears itself apart.
is very political there are so many factions
fighting against each other. Essentially it might
turn into a fiat currency where there is a governing
body. It's decentralised which is why they can't keep
up with how they will expand the network."
may as well do it'
says the fund will probably take a long position and
"scale it appropriately" because bitcoin
is an uncorrelated return stream.
lot of people suggest you hold 1 per cent of your
net worth [in bitcoin] and it will either go to zero
or $500,000 [a coin] if you are willing to lose 1
per cent of your portfolio and take a punt that it
could add $1 million to $2 million to your wealth
you may as well do it."
the prospect of the derivative exchanges such as the
Chicago Mercantile Exchange and the CBOE introducing
options to allow greater "institutional exposure"
and the prospect of a US listed exchange traded fund
eventually being approved by the Securities Exchange
Commission, there is upside.
they launch an ETF in America and people can buy that
as a share. it could be the catalyst to go to $20,000
to 25,000 a coin but I would say that's the trade
is the point where Bitcoin would "cannibalise"
5 per cent of the $US7 trillion gold market.
says the fund is an "old-school" hedge fund
targeting 30 per cent annualised returns.
aims to hit this high target through a combination
of quantitative and discretionary trading. The quant
component is divided equally into a momentum trading
and a "risk parity" strategy, akin to that
deployed by US mega funds Bridgewater and AQR.
the risk parity strategy you assume bonds and equities
have risk premiums and you want to leverage up bonds
to the same risk level as equities so that
the diversification benefits work. We use leverage
as a diversification benefit rather than for straight
hedge fund, which began trading in April 2016, has
come out of the blocks flying and is currently the
top-performing Australian domiciled fund this year
returning over 50 per cent annualised, after a 5.3
per cent gain in August.
makes it the single-highest-performing fund in Australia,
tracked by Bloomberg, over a rolling one-year period.
far it has just under $20 million of assets while
it builds its three-year track record
only have an 18-month track record so we have to tick
a few more boxes."
Australian Financial Review)