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Alternative Market Briefing

Despite a recent volatility, Portal AM's DeFi fund outperforms

Tuesday, June 22, 2021

It's been a rough few weeks for digital assets. In May alone, Bitcoin dropped from $58,000 to nearly $30,000. Performance in other digital currencies has been mixed at best. Chinese regulators announced greater scrutiny on cryptocurrency and US regulators have shied away from approving a Bitcoin ETF. For the true believers in decentralized finance, this is a test of faith.

Singapore-based Portal Asset Management is one of the DeFi faithful and believes in the long-term case for digital assets. Portal's flagship strategy, the Portal Digital Fund, is a global multi-manager fund that invests in managers that are digital asset specialists. Portal's core thesis is that digital currencies are the fourth superclass of assets alongside bonds, equities, and real assets.

Portal views digital assets as an uncorrelated source of return and at times a volatility play. As they see it - as digital assets grow and mature, there is an opportunity to invest early in specialists who understand the asset class and can take advantage of opportunities as they arise.

According to a recent update for investors obtained by Opalesque, Portal began de-risking its strategy in an effort to lower portfolio volatility and preserve capital. The move proved to be right as digital currencies started to slide at the end of April - a trend that has persisted. Portal's Digital Fund was up +50.4% net of fees for 2021 YTD through May 31. Portal plans to re-assess in July and may move into riskier bets depending on market conditions.

The update notes that the firm sees the recent drop in digital currencies as expected given how high they had climbed in recent months. Bitcoin alone was up almost 280% in less than six months. If Bitcoin settles near $40k, that would be in line with how other asset classes tend to react after a long runup. Portal adds that the performance of other digital currencies - which have been flat to negative - is indicative of a maturing market because they are no longer moving in lockstep with Bitcoin. "The dispersion around returns does provide a lot of opportunity for the various hedged strategies we invest in, most notably arbitrage, spread trading, and momentum funds," the update said.

Looking ahead, Portal expects the opportunity set in digital assets to be significant if Bitcoin settles into a price range with support and other digital assets begin to level off.

Portal CIO Mark Witten will explain his views in detail during an Opalesque webinar at 10:30am ET this morning - "Small Managers Big Alpha" - registration is free and is available here.

Other speakers include:

Robert Zuccaro, Target QR Strategies

Mukhtader Mohammed, Arbitrium Capital Partners

Craig Reeves, Prestige Funds

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