Institutional

A former ConsenSys exec has raised for a fund that’ll squeeze more alpha out of Ether

Ether has fallen 90 percent from its all-time highs, but that’s not stopping a former ConsenSys executive from starting a new fund dedicated to the second-largest cryptocurrency by market capitalization.

DARMA Capital, an investment firm led by James Slazas, formerly head of capital markets at ConsenSys, announced the launch of its new ether fund, the so-called DARMA Optimized Long-ETH Fund (DOL-ETH).

The fund, in a sense, provides a hedge for long-term ether holders interested in squeezing bigger returns out of cryptocurrency. The fund is also long biased, taking contributions in ether, and aiming to outperform the price performance of the crypto with an active investment strategy. “After choosing fundamentally strong assets that have regulatory clarity, we apply an actively managed risk overlay strategy that is designed to dynamically hedge downside price exposure as well as reduce profit give-back at positive price extremes, with a net effect of creating alpha to our benchmarked digital asset,” Slazas said in a press release. 

The firm is on track to raise as much as $50 million for the new fund by the end of March, with the expectations to grow AUM as it builds out treasury services. DARMA also plans to launch similar funds for other cryptos in the future, Slazas says.

“DARMA provides an institutional investment vehicle for digital asset investors. The interesting part is that a majority of our initial investors are crowdsale buyers and treasury management for token launched companies. This mix will shift over the next 12 to 18 months as scalability and adoption take hold and therefore lead to larger market caps and greater liquidity to support institutional-sized investments,” Slazas added in the release.

Slazas’ 30-plus year career spans firms like Lehman Brothers, where he managed arbitrage books in derivatives and structured products, to Healthcare Inside, a billing service he ran as CEO for five years. Slazas left ConsenSys in 2018 to run a family office that traded digital assets, implementing similar strategies DARMA is set to run, and outperforming ether by over 150 percent, according to the fund.

The launch of a long fund is a bold move in a market that has seen many shut or pivot to venture capital as returns from the dwindling digital asset market continue to compress for investors. A number of funds have launched venture capital funds, including BlockTower Capital and Polychain Capital. Still, despite the tough environment, a number of new funds have launched in recent months including a new activist hedge fund backed by Peter Theil and recently Arca Funds began accepting outside money.

DARMA is looking to leverage their co-founders’ combined 65-plus years worth of capital markets and quant trading experience to outperform cryptoasset benchmarks.

“When you look at all the other players out there, the service providers we’ve put together, registered with CFTC and taking that next step, this is what’s proper to bring a fund to the market. [I’ve] been involved in capital markets for 30+ years, [my brother, a co-founder] has quant trading analysis for 35+ years, this is nothing new for us. The performance will speak for itself,” Slazas told The Block.