Old Street Digital, a London crypto asset manager that has quietly assembled a team chock full of deeply credentialed investment veterans, has hit a snag: raising the kind of institutional capital its traders are used to trading.
Old Street Digital (OSD) has less than $10 million of assets under management — a drop in the financial bucket from what OSD Chief Investment Officer Gary Clarke handled at BlackRock, where he headed up the traditional finance giant’s global equity team.
From 2014 to 2016, according to Clarke’s LinkedIn, he oversaw a team of US and United Kingdom portfolio managers running more than $30 billion at BlackRock — otherwise known as the world’s largest asset manager.
Old Street has been pushing to raise the kind of external money its team is accustomed to, according to two sources familiar with the matter, confidential firm marketing materials obtained by Blockworks and United Kingdom FCA regulatory records.
Read more: UK Denies Crypto Companies the US Lets Operate
Even as digital asset markets have stabilized and bounced back from near historic lows in the fourth quarter of 2022, that effort evidently hasn’t been easy.
The firm’s latest pivot: recently tapping perFORM Due Diligence of London to conduct a review of its operations and trading functions. Run by Quentin Thom and James Newman, perFORM, started out as a traditional finance due diligence firm. But it’s since expanded into conducting reviews of crypto service providers and funds.
In an exclusive interview with Blockworks, Old Street Chief Executive Officer Paul Ridley said the crypto industry is “still in the super early days” when it comes to the level of limited partner dry powder that has fueled the rise of traditional finance fund managers for decades.
The core team Ridley works with at Old Street are all used to trading or overseeing the back and middle-office operations of a slew of strategies deploying north of $1 billion, Ridley said. The Old Street head’s resume includes stints at investment bank Nomura and Boston Consulting Group, and he has personal experience in the crypto sector.
And Chief Operating Officer Nic Basson joined the firm after spending nearly four years at alternatives giant Invesco, where he worked in senior roles focusing on emerging markets, including retail products, according to his LinkedIn.
“We’ve all had to adjust our definition of small,” Ridley told Blockworks.
He declined to comment on investor communications and the marketing materials obtained by Blockworks, citing regulatory restrictions in the United Kingdom.
Top backers, not top capital
Old Street, named for the historic mile stretch of London that has been a hotbed of hedge fund traders and their courting service providers for as long as anyone in the city’s traditional finance scene can remember, has no shortage of brand name backers behind it.
It’s the kind of firm that doesn’t need publicity and doesn’t seek it out. It’s the kind of firm that shouldn’t have this tough of a time raising serious dollars and pounds from pension advisors, top family offices and endowments.
Ten million dollars under management these days is no small sum for upstart crypto funds looking to take on the industry’s deep rooted native players — the likes of Pantera Capital and maybe even Grayscale Investments or Galaxy Digital one day.
Ridley’s team locked down a $2.8 million seed round in August 2022 led by Draper Associates, according to a statement from the time. It included participating investors like Plassa Capital, plus “prominent venture capital and angel investors across Europe, Asia and the U.S. as well as senior executives from the U.K. Asset Management industry,” the statement said.
Tim Draper, the near household name venture capitalist who founded Draper Associates, then said in the statement that Old Street’s team brought a “unique approach” that “applies traditional fund-management expertise to the world of crypto.”
That approach has yet to fully mesh, at least when measured by outside limited partner capital raised so far. But Ridley told Blockworks he and his team are playing the long game in an industry that has been beset by a lack of traditional finance understanding and regulatory hurdle after hurdle.
“What we wanted to do was take a bunch of traditional finance asset management [types], bring them together and try to build a really reputational product that would be the sort of thing that BlackRock would build, that T Rowe [Price] would build,” he said. “The kind of really clear, focused product which is the kind of thing institutions should be buying — pension funds, endowments, sovereign wealth funds.”
Asked the difference between an institutional investor in traditional finance and an institutional investor in digital assets, Ridley said that his London financial circle “have been talking about exactly that” on and off in 2023.
“No one knows what a real institutional investor is in this space — still,” he said.
Stablecoin yield for TradFi types
That said, the team has operational capital from its $2.8 million seed round, and Ridley is projecting patience in terms of really getting things going.
One of Old Street’s core strategies, which it dubs in investor marketing materials as the “Old Street Digital Crypto Cash Management Solution,” had delivered a gross annualized return of 11.7% from its inception in the fourth quarter of 2022 through the end of February.
It targets an 8 to 15% annual return, per the same materials, by following a strategy that makes stablecoin investments across DeFi protocols. There’s monthly liquidity under the commingled structure, which the marketing materials say has had zero down months.
It’s intended to appeal to both traditional finance backers and crypto native investors looking for yield in the wake of Silicon Valley Bank (SBV) folding — as well as the likes of Signature Bank, two of the sources said.
It invests in “blue chip” pools of DeFi assets, engaging in collateralized lending, also known as yield farming, and it’s been marketed in a way that might appeal to credit investors with an appetite for risk beyond plain vanilla bonds. Old Street isn’t exactly going after the distressed debt TradFi crowd here, sources said.
The marketing materials list a number of US stablecoins, including USDT, USDC, BUSD, DAI, FRAX, TUSD, USDP, USDD and GUSD.
It’s intended to be the safe play that limited partners with billions of dollars at their disposal ought to be able to grasp: low volatility, at least so far, coupled with the inherent transparency of blockchain technology. The crypto cash play doesn’t take directional bets and prominently states in its marketing materials that it has “zero exposure to Bitcoin, etc.”
And it’s being shopped around to investors as combining quantitative elements with fundamental research — the kind of “quantamental” language that Wall Street types ought to be able to grasp, might be able to get behind.
It holds assets held by Old Street on-chain, which the firm says results in “access to opportunities not possible off-chain.”
Crypto custodian Fireblocks, as well as the FCA-regulated TrustVault, have been put in place as counterparties on Old Street’s multi-signature solution to safekeeping client cryptoassets, according to the materials.
The crypto long haul
The collapse of FTX and the crypto meltdown that marked the end of last year didn’t help the grand capital raising aspirations of Old Street and its competitors.
Macro conditions and regulatory concerns aside, though, Ridley said that the disconnect between household crypto names and household finance names is still frustrating, at least at times, across the board.
In describing Clarke’s credentials, Ridley said he was “pretty much at the top of the profession…in the equities world” when he was running $30 or so billion at BlackRock.
Clarke is 54 and is a “fund management nerd first, but he’s alternative enough to have a cool haircut, and spend his time thinking about tokens now,” the Old Street chief executive said.
“I always argue that he’s a bigger name than [Mike Novogratz, the founder of Galaxy Digital] is,” Clarke said. “It’s just that no one gives a shit about equities. And we’ll stand on a stage and yell and scream and sweat or whatever, right…To make a long story short, we’re trying to approach crypto in a different way that we think is going to be much more attractive to be the biggest kind of investors out there. Despite everything that’s going on in the crypto market and whatever.”
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Source: https://blockworks.co/news/blackrock-crypto-fund-old-street