Citigroup Executives Seek $100M for Crypto Hedge Fund

Three former Citigroup Inc. executives have left the Wall Street bank to form Motus Capital Management, a company aiming to make it easier for high net-worth individuals to invest in cryptocurrencies.

The three executives, Alex Kriete, Greg Girasole, and Frank Cavallo, seek $100M in funding for two actively managed hedge funds focusing on virtual currencies. “Clients are hungry for returns,” said Kriete. “They’re wanting exposure, but they have a hard time telling what’s scammy and what are real investment opportunities.”

Kriete formerly managed $3 billion in assets for private clients at Citigroup, while Girasole managed $5 billion. Upon leaving Citigroup to co-found Motus, Kriete said on LinkedIn, “…I believe digital assets will continue to grow in importance to global capital markets and the formation of new business models.” Before leaving to co-found Motus Capital Management with Kriete and Girasole, Cavallo served as an investment counselor at Citigroup.

The three seasoned Wall Street veterans will plow their own money into the growth and income hedge funds. The growth fund will focus squarely on cryptocurrencies with a smaller market cap, unsuitable for investment by more considerable funds. “We think we hit the sweet spot,” he said. “With assets like bitcoin and ETH, clients can do that on their own. They don’t need to pay someone to buy bitcoin.”

Hedge funds are a growing niche, with $3.8B invested

Hedge funds are usually limited-liability partnerships that pool capital from investors and employ risky strategies such as longing, shorting arbitrage trading, and fundamentals-based investing to generate high returns. The median crypto hedge fund yielded 128% in 2020 from 30% in 2019, but investors need to hold their money in the fund for over a year.

Motus is entering a sparsely populated asset management landscape. A 2021 report by PwC suggests the global asset value under management in crypto hedge funds is $3.8 billion, up $1.8 billion from 2019, with a little less than half (46%) of all the companies surveyed holding assets exceeding $20 million. Those investing in these funds must invest over $100K, making the investment feasible only for institutional and high net-worth investors. The report by PwC confirms that the 150 crypto hedge funds in operation manage assets by high-net-worth individuals (54%) and family offices (30%). The growth in cryptocurrency hedge funds has coincided with bitcoin’s performance between 2012 and 2021.

How do Wall Street companies view crypto hedge funds?

As the popularity of crypto increases, many hedge fund veterans are betting big on the future of cryptocurrency. The largest hedge fund globally, Bridgewater Associates, is planning to invest in a crypto hedge fund but does not plan to invest in cryptocurrencies directly. The firm’s founder, billionaire Ray Dalio, owns some of the most popular cryptocurrencies like bitcoin and has warned that governments will outlaw the digital currency if it becomes too popular.

Founders of hedge funds like Tudor Investment Corp. and Alan Howard are now expanding their crypto trading operations. Both have previously worked at giant firms such as Morgan Stanley and Citigroup and have extensive experience in the financial industry.

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