Arca Funds aims to institutionalize tokens with new fund

Los Angeles-based Arca Funds has launched with the goal of helping to institutionalize digital tokens and cryptocurrencies. Arca Funds is the work of Steven McClurg, a director at Guggenheim Partners; Rayne Steinberg, co-founder of Wisdom Tree and Jeff Dorman, who was most recently COO at Harvest Exchange

The goal of Arca Funds is to give institutions a way to invest in cryptocurrencies including select digital tokens. The team at Arca Funds claims that it has developed a bottom-up analysis process that identifies sound digital coins as well as digital tokens that are affiliated with verifiable projects. The investment team looks at a variety of qualitative and technical vetting factors to determine if a token is likely to stand up over time. The end result is a diversified portfolio of digital assets.

The firm is leaning on its decades of fiat-based multiasset experience to create fund structures that are familiar and approachable for institutional investors. These vehicles include traditional risk management, compliance and security frameworks. By relying on what Arca Funds calls an "interdisciplinary approach" the fund team is also using its experience in traditional finance to design an investment research process that is rigorous and builds on best practices around portfolio and investment thesis construction

Arca Funds has developed its own proprietary framework to determine position sizing within its risk framework.

Initially, the firm is coming to market with a family of funds that provide exposure to digital assets based on investor risk tolerance. The fund is looking for seed investors for these funds and for the business.

Looking ahead, the firm is examining the possibility of designing its own tokens for traditional exchangetraded financial products and is also working on creating and licensing crypto indexes.

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This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.