Global Custodian Hedge Fund Annual 2018 | Page 22

[ M A R K E T R E V I E W | C R Y P T O C U R R E N C Y administration on a “very selective and risk-adjusted basis” and that the company turns away over 90% of the opportunities they look at. On-request service Stonegate said it believed itself to be one of the first firms to begin providing fund formation and fund administration services to crypto funds back in 2015. “Fund administration of crypto funds is a highly complex process. From what we’ve seen, of the more than 600 global fund administration firms in the world, only a small handful (perhaps five to seven firms) service crypto funds,” says Carmen Barnett, managing director at Stonegate Global Fund Services. Other players such as Triple Leo Consult- ing, NAV Fund Administration Group and Theorem Fund Services are also offering services. Technology provider Libra has said it is currently providing services to 12 fund ad- ministrators, with another five in contract- ing for its middle- and back-office services, suggesting many more traditional players are also looking at entering the space. “I certainly get the impression it’s an on-request type of service,” adds Gouldstone. “I get the impression it’s not easy to fit into a normal book of business. Many are not quite ready to bang the drum on selling it as a service. From a fund admin point of view, it depends on your niche and your area at the “We have seen just as much crypto fund formation and investing activity outside the US as we have seen in the US.” ALEX MASCIOLI, CEO, NORTH STREET GLOBAL moment, there are a lot of fund management firms who like to work with a generalist. Whether it’s global, regional, fixed income or equities, some want to work with a small number of firms to cover the entirety of what they do.” Understanding the game In July, North Street Global established the first crypto fund-only administration service, launching with $700 million in cryptocur- rency assets under administration from around the world. 22 Global Custodian The Hedge Fund Annual 2018 A D M I N I S T R AT I O N ] The offering will include full-service cryp- tocurrency hedge fund administration, mar- ket data services and AML/KYC compliance. North Street Global’s CEO, Alex Mascioli, explains that they are targeting clients in the US, and also Asia and Europe. “We have seen just as much crypto fund formation and investing activity outside the US as we have seen in the US,” explains Mascioli. “We anticipate the greatest initial take-up for new launches will be from those jurisdictions whose regulations are currently either the most lenient or organised.” A big challenge for fund administrators has been adding crypto expertise and intel- lectually understanding the new market. Speaking to a handful of the players offering services, it became clear they had invested significant time into educating themselves, speaking to experts, lawyers, regulators and auditors. Perhaps none so much more than the team at Trident Trust. “We always took the approach that we could dig into any particular asset a manag- er wanted to invest in and understand the economics,” says Dan Smith, president at Trident Trust. “Our office in Atlanta had always taken a fairly entrepreneurial approach to private funds and things private fund managers want to invest in.” Smith highlights that Trident Trust began with the first client back at the start of 2017, before the infamous Bitcoin bull run. Just over a year and a half later it has around 50 funds signed up across its Cayman, Malta, Dubai and Singapore offices, along with Atlanta. “Anything you want to be good at, wheth- er its playing the trumpet, riding a bike or crypto hedge fund accounting - it takes time to learn, but it has been nice that we’ve got to know the other providers in this space, the custodians, lawyers and auditors for example,” he explains. Crypto fund vs traditional Trident says that some of the funds at the be- ginning were smaller – by hedge fund stand- ards – at around $20 million, while some of the administrator’s newer clients have man- aged more than $100 million, proving that larger investors are entering the space. “All the business has been new managers as clients, but having said that we have engaged with some existing firms who think they can implement their strategy in this asset class,” adds Smith.