Presidio Trading announced its plan to spin out its cryptocurrency markets tail risk strategy as a standalone fund. The decision to launch this fund comes as a result of the strategy’s strong performance through 2022, so far. “Many current and prospective investors in our multi-strategy fund were interested in learning about our tail risk strategy and if we could provide them with access to the strategy through a standalone vehicle”, said Christopher Kvamme, Founder and CEO of Presidio Trading. “But it’s not just other funds and investors who can benefit from protection against nonlinear drops in cryptocurrency markets. I think this new fund will be valuable to the entire crypto-ecosystem and anyone with significant exposure to crypto.”
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Presidio Trading’s new fund will utilize its existing tail risk strategy with some slight changes. Kvamme elaborates: “Our tail risk strategy works by creating a portfolio that attempts to maximize the geometric mean return when combined with how we anticipate our other strategies to perform, given various market conditions. Take June of this year for example, a month where ETH fell 44% and BTC fell 37%. Presidio Trading’s existing private fund had under 1% of its NAV allocated to the tail risk strategy which returned about 560%, so the fund’s 1% allocation to the tail risk strategy generated returns, calculated on the basis of the fund’s entire capital, equal to +4.7% for that month. The fund’s other strategies lost about 0.77%, so the losses incurred by the other strategies were more than covered by the gains from the tail risk strategy. However, while the tail risk strategy can have positive returns when cryptocurrency markets decline, it is generally designed in a way that results in it experiencing losses when cryptocurrency markets are performing well. In order to try to provide the new fund’s investors with similar protections, the strategy will be tweaked to provide broader protection; most likely by covering a cryptocurrency index”.
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Presidio Trading is planning to open this fund to accredited investors in the first quarter of 2023, with limited capacity. “Regardless of whether there will be more contagion in the near future, it is important for people to understand that they need to manage their risk. Avoiding large losses is the most important factor in raising a fund’s CAGR and ultimately the log wealth of its investors.”, added Kvamme.
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