The author of an investment newsletter said Wednesday that he will help a major digital assets fund open its New York office at the beginning of November. The announcement follows news in September that former Fortress hedge fund manager Michael Novogratz plans to launch a similar $500 million fund.
Paul Brodsky was an options trader in the 1980s, helped found a mortgage trading broker-dealer that was sold to Piper Jaffray in 1994 and began managing assets for investors in 1996, according to Brodsky’s website. He launched his Marco Allocation newsletter on market analysis in 2015.
The newsletter took a different tone Wednesday. “It has become increasingly obvious to me that blockchain-based investing presents unparalleled risk-adjusted secular returns,” Brodsky said in a note to subscribers. He will become a partner at California-based Pantera Capital.
Digital asset investments over time (in $ millions)
Source: Autonomous Next analysis, Pitchbook data
At least 75 “crypto-funds” have launched to invest in digital currencies such as bitcoin and projects based on the blockchain technology behind them, according to financial research company Autonomous Next.
Pantera is one of the oldest funds in the digital assets world. The company says it became the first U.S. fund to invest in bitcoin in 2013.
Founder Dan Morehead also hails from Wall Street. He was head macro trader and CFO at Julian Robertson’s Tiger Management hedge fund, and was global head of foreign exchange options at Deutsche Bank. Morehead is also the chairman of one of the largest bitcoin exchanges, Bitstamp.
“Blockchain is an important new asset class. In the coming decade every financial institution will have a blockchain division. We’re trying to lead that initiative,” Morehead said in a phone interview with CNBC. He said Pantera has raised $300 million, primarily invested in digital currencies and new token sales known as initial coin offerings.
Increased interest from institutional investors has helped send digital assets soaring. Bitcoin has briefly multiplied six times in value this year to above $5,800. New digital coins have exploded, raising more than $2 billion this year in initial coin offerings.
Brodsky said bitcoin “certainly does resemble a bubble” but digital currencies overall have a long way to go before fulfilling their potential as the building blocks of a next generation of the internet.
“I’m very, very excited and it is the opportunity of the lifetime,” he said. “It reminds me of the transformational innovations I experienced in securitization in the ’80s.”
Securitization is the process of combining financial assets into an investable product, which some say hurts financial stability.