Larnaca-based ARK36 announces its launch as a hedge fund focused on the cryptocurrency markets, delivering a risk-adjusted exposure to crypto-assets for professional investors. Grant Thornton Cyprus is fund administrator.
Why a cryptocurrency hedge fund? “I believe that crypto-assets, as an asset class, is one of the things that has the best asymmetric risk-to-reward ratios. It’s promising on so many levels,” notes ARK36 founder Ulrik Lykke.
Lykke points out, for example, that much has been happening with bitcoin. Bitcoin has jumped above $11,000 per coin recently. In September, Nasdaq-listed business intelligence specialist Microstrategy raised its bitcoin holdings to $425 million. In October, payments giant Square placed $50 million in bitcoin, a sum equivalent to 1 per cent of its total assets.
And, on Wednesday, Paypal announced its acceptance of bitcoin as well as some other cryptocurrencies.
“There is a great momentum going on in traditional finance to get closer to this asset class. There is a finite supply, and as demand increases, prices are set to rise,” Lykke predicts.
Yiannos Ashiotis, leader for Regulatory Compliance and Fund Services at Grant Thornton, Cyprus, agrees: Grant Thornton Cyprus has been expanding its work in the cryptocurrency sphere, responding to strong demand as digital asset investment becomes increasingly mainstream.”
“Bitcoin is the leader, the one that comes the closest to a decentralised value system,” Lykke says. A decentralised system offers bank-free methods of transferring wealth or ownership without human intervention. “Bitcoin is one of the biggest winners, and for the long haul.”
Other cryptos have different spheres of use. “Ethereum, and other projects, are really putting themselves in decentralised application networks. Opportunity to programme logic into a value system – that’s interesting on many levels as well,” Lykke continues. “I have a lot of belief in Ethereum, the creator of smart contracts, which competes on its innovation – there are so many things going on with what one can do with this technology, while bitcoin must remain stable and reliable.”
Lykke points to another virtue of cryptocurrencies. “With these coins, you can actually have possession of the asset. You can take it off the exchange where you purchased it and just hold it in your wallet, or place it on another exchange. You can’t do this, for example, with stocks, which trade only on the exchange where they are listed.”
As a licensed Alternative Investment Fund Limited Number of Persons (AIFLNP), aimed specifically at cryptocurrency investments, ARK36 sees itself as ideally placed to capitalise on this growth while its focus on crypto, rather than a range of alternative investments, means that investors looking to diversify their portfolios will not find their exposure to other asset classes duplicated, the fund says in a statement.
ARK36’s Danish management is comprised of partners Ulrik Lykke and Mikkel Mөrch, supported by Jacob Skaaning and Marck Bertelsen. The team behind ARK36 have been active investors in cryptocurrency since 2012 and before that in other markets.
Why did this group of Danes choose Cyprus?
“Cyprus has a wonderful reputation and history for fund management and a good tradition for financial industry. Strong private sector with good actors and competent personnel. These are the things you are looking for when you seek an environment in which to set up a fund,” Lykke comments.
“Oh, and we also like the great weather,” he concludes.