SkyBridge Capital, the US fund of hedge funds led by Anthony Scaramucci, will now “focus its attention on Bitcoin”, after recording its worst annual performance since 2008 last year.
Traditional fund manager Mr Scaramucci, who served a short stint as US President Donald Trump’s communications director, said the investment company now considers the cryptocurrency a store of value that rivals gold rather than a digital currency.
While he recognises the coin’s “volatility”, he expects investors in SkyBridge's new Bitcoin fund to adopt a buy-and-hold strategy with the firm encouraging a holding period of three to five years.
“We're putting our money where our mouth is, so we have $350 million across our product line and on December 22, we put $25 million of the firm's capital into Bitcoin,” Mr Scaramucci told investors attending a briefing about the new SkyBridge Bitcoin Fund.
“The returns have been quite good; we recognise that Bitcoin will be volatile. We had an asymmetric lift-off, which is a little bit of luck and timing on our part. That by no means suggests that we think that this asset class will go up in a straight line.”
The new Bitcoin fund went live on Monday, after the company recorded its worst annual performance since 2008, losing about 7.5 per cent of its value as competitors reported strong gains for bonds and equities.
After investments in the main debt-focused hedge fund suffered a 23 per cent loss in March, SkyBridge investors asked for $1.7bn back.
However, Mr Scaramucci said the fund rebounded over the year, recovering some of its losses with hopes the new Bitcoin fund will help the firm collect new assets.
There was a surge of interest in cryptocurrencies last year, causing the price to soar more than 300 per cent over the 12 months, with a rise of almost 50 per cent in December alone.
Some analysts warn that retail investors and trend-following quant funds are pumping up an unsustainable bubble, with recent interest from famed investors including Paul Tudor Jones and Stan Druckenmiller.
The cryptocurrency is increasingly “embraced in more global investment portfolios as holders expand beyond tech geeks and speculators”, Bloomberg Intelligence commodity strategist Mike McGlone wrote in a note last month.
The rally continued this month with Bitcoin crossing the $40,000 threshold on Friday, a day after the total market value of all cryptocurrencies surpassed $1 trillion for the first time.
“A major price level has been hit and Bitcoin has proved that this is not the asset class you want to mess around with. It has proved itself to all disbelievers today,” said Naeem Aslam, chief market analyst at Avatrade.
“Now, everyone knows about Bitcoin and they want to have a small piece of Bitcoin. Of course, institutional traders are the ones who have really got the rally going. The next major stop for the Bitcoin price is $50,000 now.”
The interest from parties such as SkyBridge has focused on the narrative that the coin could act as a store of wealth as central banks pump stimulus into Covid-battered economies, even as inflation remains mostly muted.
Bitcoin should eventually climb to about levels as high as $400,000, according to Scott Minerd, chief investment officer of Guggenheim Investments.
Mr Scaramucci said Bitcoin is actually “better than gold in terms of the portability and the impregnability of the code, meaning it can't be broken into or stolen”.
He also compared owning it to buying shares of Amazon.com when the company went public more than two decades ago. Shares of Amazon have undergone bouts of steep selloffs over the years but the firm is a dominant player in the online retail space today.
He lauded “the idea behind Bitcoin creating this super network around money very similar to what Amazon has done in terms of a super network around retail”, and what Facebook has achieved for the social network.
“So for all of these reasons, we're very excited about it,” he said.
Affluent investors in the SkyBridge Bitcoin Fund can subscribe directly to it with a minimum investment of $50,000.
The money is tied up for the first three months, said Mr Scaramucci, with SkyBridge charging a 0.75 per cent expense ratio with Fidelity as its principal custodian.
“It is a buy-and-hold strategy in that fund and we sort of are trying to coach people to that three-month lockup,” he said.
“I'm thinking about it in terms of the three- to five-year holding period. Everybody is a long-term investor until they have short-term losses, of course, but I really do think if you're going to be in this asset class with us, then think of it over longer periods of time as opposed to trading.”
Brett Messing, SkyBridge's president and chief operation officer, told investors tuning into the briefing that while Bitcoin is “super complicated” on some levels, it is also very easy.
“There’s a limited supply, and there's considerable demand. There will only ever be 21 million bitcoins, and about two or 3 million are gone forever, right from the early days when it was worthless, and people lost them,” Mr Messing said.
“This is an emerging asset class that's maturing, and it's de-risking in our eyes.”