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Cryptocurrency Hedge Funds Boom In India

Mar 03, 2018 Posted /  1891 Views

Cryptocurrency Hedge Funds Boom In India

The CEO of Authorito, Mohit Mamoria shut down his internet venture in order to actively operate a cryptocurrency hedge fund. He recently started the second fund after the successful debut of its first fund where he delivered the 15-fold return to his investors. The second fund is an open-ended one with around $50 million.  

“We identified the potential of ethereum and invested when one ETH (the currency signal for ethereum) was $2. Within months, the value of investment shot up to $280 a piece,” - CEO Mohit Mamoria

India is new in the field of crypto asset management which grabbed the limelight in last 12-14 months, whereas there are around 200  hedge funds globally. Worldwide, funds like Polychain Capital and Meta-Stable Capital are backed by marquee venture firms Sequoia Capital and Andreessen Horowitz respectively. Other hedge funds such as TAS and Multicoin Capital operate with corpuses in the range of $5 million - $100 million.

The Founding partner at law firm TRA, Jitender Tanikella is a specialist in representing early-stage investors. As cryptocurrencies are not accepted as legal tender in India, Jitender Tanikella founds hedge funding risky.

“Investing in (crypto) hedge funds is risky. They can lose all their money.”  - Jitender Tanikella

Indian crypto hedge funds claim that their entire trading is based on virtual tokens and they don’t accept legal tenders or fiat currency for transactions in order to avoid fall foul for regulators. They also stated that to skip unaccounted money, they strictly follow know your customer and anti-money laundering process.

“For individuals, it is a minimum investment of $10,000, for family offices and institutional money it is $250,000. We also make sure no individuals invest more than 2 percent of their investible corpus,”  - Authorito’s Mamoria

Investors putting their money in the crypto hedge, sign a minimum one year lock period agreement and also pay quarterly for management services incurred by them. The funds also charge a fixed ratio of profits received on investment. Mohit Mamoria’s Authorito charges 20% of profit, i.e., the excess amount is shared in 1:4 between management and investor respectively. In the second funding, 90% of the principal amount will be invested in ICOs.

Through getting indulged in such opportunities, the cash-rich investors enjoy high profits leaving all the technicalities on crypto devotees.

Nitin Sharma is an angel investor and founder of Incrypt. He is exploring  Blockchain but with certain cautions because of lack of regularities.

“I believe the legal costs of raising a fund internationally (especially if it’s tokenised) could be as high as $1-2 million, On the other hand, regulations around soliciting capital in India are still not clear.”  - Nitin Sharma

Quadarch is a firm that is focused on investing in virtual assets and has a team of technologists, analysts, researchers and crypto experts to keep a track on virtual economy. Quadarch use diversification strategy where they diversify their funds in a fixed ratio and invest in various virtual assets accordingly. Quadarch has distributed its sources as follows: 50 percent in top 10 Virtual tokens, 25 percent in Initial Coin Offerings, 22.5 percent on daily tradings as per market scenario, and remaining 2.5 percent in the high-frequency asset.

The chief investment officer of QuadarchFunds, Abhinav Singh denied to disclose capital size and said, “We are still waiting for RBI or SEBI regulations to know what sort of regulatory framework this type of investment will fall under.”

The central bank of India has warned several times about involvement of risk factor in cryptocurrency. India has not declared rules and regulations regarding the circulation of cryptocurrency yet. Investing in hedge funds in such scenario can be risky, but according to Jitender Tanikella, it is not if one does not violate any rule.

“Only in the case of violation, If a hedge fund investment is within the LRS limit it is not a violation of FEMA. Banks are the gatekeepers for these remittances as they have to report to RBI. I doubt they would permit transaction in violation of FEMA/LRS,”  - Jitender Tanikella

As per Liberalised Remittance Scheme (LRS) of India introduced in 2015, an individual can remit up to $250,000 in a financial year, and a family of foul can amalgamate it into $1million in foreign investments.

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Tags: cryptocurrency

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