Stockholm (HedgeNordic) – Having started out as a pure digital-currency asset manager, Stockholm-based Hilbert Group has now been listed on Nasdaq First North as a digital asset investment firm focused on four business verticals: asset management, proprietary trading, private equity investments, and data and analytics. The asset management arm focuses on managing Hilbert Digital Asset Fund, its flagship product that offers investors broad exposure to the crypto market, and on expanding its product range with the upcoming launch of three additional funds.
“We started as an asset manager and launched our first fund, the Hilbert Digital Asset Fund, in January of 2019,” says Niclas Sandström (pictured), the CEO and co-founder of Hilbert Group. “That is the only fund we have up-and-running right now, but we are planning to roll out an additional three funds.” Managed by CIO and co-founder Magnus Holm, the flagship Hilbert Digital Asset Fund is an algorithmically traded long-only fund offering broad exposure to bitcoin and altcoins – alternatives to bitcoin.
“Hilbert Digital Asset Fund is an altcoin fund with a long-only strategy at its core.”
“Hilbert Digital Asset Fund is an altcoin fund with a long-only strategy at its core,” explains Sandström. “We do not take any short positions and do not use leverage,” he continues. “The use of leverage in these volatile markets can be very dangerous.” The algorithmically traded strategy maintains a “constantly rebalancing portfolio of a large number of liquid digital assets based on what we call volatility harvesting or mean-reversion.” Following a mean-reversion strategy, Hilbert Digital Asset Fund transfers capital from digital assets winning against bitcoin to assets losing against bitcoin to bring the allocation to each asset to its pre-determined weight in the portfolio.
The fund’s investment universe predominantly focuses on the over 100 or so billion-dollar market cap altcoins. “If you are looking at the top hundred altcoins in the crypto market today, all of them have a market cap exceeding $1 billion. These are really deep and liquid markets,” says Sandström, who spent seven years at emerging markets-focused boutique asset manager Finisterre Capital before founding Hilbert. “With few exceptions, we only look at the top hundred altcoins in terms of market cap.”
“If an asset goes up versus bitcoin, our algorithmic strategy sells it back to the equilibrium weight, and if an asset goes down versus bitcoin, it buys that asset back to the equilibrium weight.”
“Our portfolio currently includes 76 of those digital assets, with different weights assigned to each asset,” explains Sandström. “If an asset goes up versus bitcoin, our algorithmic strategy sells it back to the equilibrium weight, and if an asset goes down versus bitcoin, it buys that asset back to the equilibrium weight,” he continues. “In this way, we do these so-called round trips where you buy low and you sell high. The more of these round trips you do, the higher returns you can generate.”
“On top of that, our volatility harvesting or mean-reverting strategy can add substantial returns.”
“Our thesis is that the crypto market is a growth area and will have a good run over the next 5-10 years, so we are comfortable being long-only on the space,” Sandström tells HedgeNordic. “On top of that, our volatility harvesting or mean-reverting strategy can add substantial returns.”
The asset management arm of Hilbert Group plans to launch an additional three funds by year-end, one of which is Hilbert Crypto Opportunities Fund. “As opposed to our flagship fund, the Crypto Opportunities Fund is going to be discretionarily traded with a focus on investing in early-stage digital assets with smaller market capitalizations,” explains Sandström. “The fund is more focused on small-cap, mid-cap and early-stage digital assets, and can even take part in pre-sales, ICOs,” he continues. “Relying on a discretionary strategy, the fund will be taking more concentrated positions in high-conviction cryptocurrencies.”
“As opposed to our flagship fund, the Crypto Opportunities Fund is going to be discretionarily traded with a focus on investing in early-stage digital assets with smaller market capitalizations.”
The other two funds are designed and launched in cooperation with a Hong Kong-based asset manager. The first one, Hilbert Syrius Bitcoin+ Fund, is an algorithmically traded fund focusing on a small basket of leading altcoins, predominantly bitcoin. “Using a mix of trend-following and mean-reversion strategies, the fund can allocate between cash and crypto depending on the environment,” explains Sandström. “The risk profile of this fund is lower compared to the other two funds.”
The second fund, Hilbert Series Multi-Strategy Fund, operates as a fund of crypto funds. “It is essentially a fund of funds, but the mandate allows us to take direct exposure to cryptocurrencies on our own,” says Sandström. “Despite the flexible mandate, we will start by allocating to other promising managers. We have been following this space for some time now, and we have a good idea of what funds we like and we believe are well-run,” adds the CEO. “We are going to have an emphasis on market neutrality, not completely market neutral, but more towards that spectrum.” The fund, therefore, will have an even lower risk profile compared to other three funds.
“There has been a strong pickup in investor interest this year, with many big institutions approaching for the first time.”
Hilbert Group’s rollout of several crypto-focused funds comes amid growing interest in digital assets among institutional investors. “There has been a strong pickup in investor interest this year, with many big institutions approaching for the first time,” says Sandström. “Previously, we typically received interest from family offices, but this year, a lot of institutions want to talk about crypto and are approaching us about getting crypto exposure. There is a huge difference between 2021 and 2020 in this respect.”