|
James McDowall By Matthias Knab for New Managers: In the final part of this series ahead of our June 30 webinar, Arcanum Capital's James McDowall gets specific: the performance, what is driving it, and why the structure matters for new investors.
Read The Future of Money Is Emerging Before Our Eyes (Part 1 of 3) here.
And Finding Alpha on the Ground Floor (Part 2) here.
Up 114%, and still open at par
Matthias Knab: Let's talk about where the fund is right now.
James McDowall: We have been raising and deploying for just over a year, so this is not a greenfield fund where investors come in and we have only an idea of how we will deploy. It has actually been working for over a year. Investors are lucky that they can still come in at par, at zero uplift, because on the capital we have deployed the fund was up around 114% as of the end of last year - a gross 2.14x across the portfolio. None of that is realised yet; it is all unrealised mark-to-market and priced step-ups.
The reason is what we call the fund drivers. The companies we have written the largest checks to are performing extremely well.
Crosspoint: the 6x
James McDowall: We seeded Mexico's first and largest commercial neobank built on stablecoin rails, a company called Crosspoint. It is now helping some of the world's largest businesses - Fortune 500 and even top-100 companies - process their cross-border payments to partners, clients, suppliers and manufacturers. It manages the whole journey: it takes the local currency, swaps it into a stablecoin via FX, uses the stablecoin for the cross-border leg, and then a partner on the other side switches it back into the local currency.
This came out of a real problem. Picture a Chinese company that wants to import goods into America and uses Mexico as a proxy - it ships components to Mexico, has the product assembled there so it is technically manufactured in Mexico, and then the finished goods cross into the US. Along that supply chain there are constant cross-border flows: money moving from America to Mexico, and from Mexico back to China. In the traditional banking system that is a nightmare - three currencies, delays, banks closed at weekends, time zones, and every bank and FX provider in the chain taking its cut. Transactions were taking days, slowing business down and costing too much. Crosspoint set out to fix that, onboarded more and more clients, and is now doing very large volumes - processing on the order of $436 million in monthly stablecoin volume, and cash-flow positive since April 2024. Co-investors include Coinbase Ventures, Bitso and Morgan Creek.
We seeded Crosspoint at a $25 million valuation. They have now filled their Series A at $150 million - already about a 6x on our capital. We have allocation reserved to follow on into that round so we retain our 2% ownership.
HiFi: the second driver
James McDowall: Another company we wrote a large check into is also performing strongly. HiFi provides programmable stablecoin orchestration - modular APIs that let developers convert fiat to stablecoins, move money globally in seconds, and automate financial flows. It is processing $2-3B in transactions on an annualised basis and growing rapidly, and ranks among the largest volume movers on Circle's Payments Network. We seeded it at a $45 million valuation, and a subsequent financing has since closed at a significant step-up - over 3x our entry mark. That is where the returns are coming from: the largest checks we have written are performing extremely well.
Discipline behind the upside
It is worth adding the context Arcanum sets out for prospective LPs. The fund is built on power-law portfolio math, not single-bet hope: roughly 30 to 50 positions, an initial 1 to 2% ownership target, around 30% of capital reserved for follow-ons, a 10% cap on exposure to any single company, and no leverage at the fund or portfolio level. The firm also runs explicit "kill criteria" - it has fully written off positions in Fund I where teams ran out of capital before reaching product-market fit, and it marks liquid positions down to observable prices each quarter. The upside is real, but it is underwritten inside a framework that is just as willing to recognise losses early.
Built for institutional diligence
For allocators, the operating architecture is the part that turns a compelling story into something investable. Arcanum Capital is BMA-regulated. Fund administration and NAV are handled by Formidium, the audit by Michael Coglianese CPA, fiat banking through a regulated US partner, and custody through Apex for contractual instruments and XBTO (on Fireblocks infrastructure) for digital assets. Capital moves only under dual-authorization and multi-signature controls, so the manager cannot move fund assets unilaterally. The point is exposure to the stablecoin build-out without the token volatility, regulatory ambiguity or operator risk an allocator cannot underwrite.
Why now, for new investors
Because Fund II is closed-ended and has been raising and deploying concurrently, new LPs gain immediate exposure to the existing portfolio - including the drivers above - as well as to future investments, alongside co-investment access to Arcanum's early-stage dealflow. As mentioned, investors can still come in at par on a portfolio already marked well above cost.
The regulation, the institutional adoption, and the economics are converging at the same moment. The future of money is emerging before our eyes - and this is the live conversation about how to participate in it.
|
RSS
