Crypto Exchange FTX Has Mulled Funding Outside Managers After Investor Interest

Cryptocurrency change FTX has thought of establishing a fund of funds operation to provide investor capital to outdoors digital asset portfolio managers, in keeping with three sources accustomed to the matter.

The hassle seems to be in its early levels, with one supply saying the change — and its US affiliate, FTX.US — has probed the chance with attorneys in current weeks. It will mark one of many first such fund of funds for exchanges, which have a pure pipeline of institutional crypto traders set as much as provide voluminous quantities of day-one capital. The change Huobi already runs a fund of funds operations, although its property beneath administration couldn’t be obtained. 

A spokesperson for FTX stated the trouble got here on the behest of purchasers longing for publicity to actively managed crypto methods.

“Whereas we’ve got had inside discussions to discover what a crypto fund of funds would appear to be given demand from the market, it’s not one thing we’re seeking to pursue at this present time,” the spokesperson stated. 

Nonetheless, FTX, led by Sam Bankman-Fried, might pursue the trouble down the street. As exchanges look to diversify income streams past buying and selling charges — transferring into the likes of staking and prime brokerage — a fund of funds mannequin might present a pure match. What’s extra, it could maintain big-time institutional traders concerned within the change, which must translate into such gamers using FTX’s different choices.

“They stated, ‘We get requests on a regular basis from our large merchants and our large traders who’re utilizing the change,’ saying, ‘Hey, is there one other method that we will get publicity to the area in a extra actively managed method?’” one supply stated.

Sources had been granted anonymity to debate delicate enterprise dealings. 

If the change had been to maneuver ahead with such an effort, one other supply estimated it might begin buying and selling with nicely in extra of $100 million, including that there’s a “lot of curiosity” from establishments in such a product. 

Fund of funds — which allocate a pool of limited-partner capital to vetted outdoors hedge or enterprise capital managers — are rising in reputation this 12 months because the variety of blue-chip launches have picked up. Prior to now, there weren’t sufficient managers, particularly on the hedge fund aspect, to justify a significant capital-raise for a multi-manager operation. 

The promote for institutional traders now: FTX can deal with the due diligence and sourcing of managers, which might be difficult for non-crypto natives, who’re usually keen to fork over fund of funds charges in change for the service.

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