Venture
Typically, in the private markets, we see a bifurcation between private strategies and private equity strategies. On the private side, we see managers investing in projects undergoing private presales, follow-on sales, and the like, whereas on the private equity side, managers are focusing on business models that do not warrant a and instead invest in these businesses as you would in traditional venture equity. We typically see three sub-strategies here, but for the purposes of our framework, we refer to this strategy as simply venture.
Seed/Early Stage — these are investors that finance the very early development of new products or services. Typically, we see simple agreements for future (“SAFTs”), simple agreements for future equity (“SAFEs”), pre-sales, and early stage private sales (typically Series A) as the investment structures in this strategy.
Growth — these are investors that finance expansion and help projects position for critical mass. Typically, we see private sales (typically Series B, Series C, etc.) as the investment structures in this strategy. On the side, we see larger private accredited investor rounds to increase distribution and participation.
Late Stage — these are investors that finance positions that are in the works of positioning themselves for public offerings. The projects can demonstrate significant growth but may or may not be showing value accretion. Projects have usually been in existence for more than three years. Typically, we see later-stage private sales (Series D, and onward) as the investment structures in this strategy. On the side, this might take the form of a public , launch of the network, airdrop, or public listing of on an exchange.
Smart Beta
Active Indexing — these are managers that index to a certain benchmark but are overweighting or underweighting certain selected digital assets actively in an effort to outperform the benchmark.
Passive Indexing — these are managers that create a market-weighted index or portfolio in an effort to offer a diversified, low turnover, low cost alternative (e.g., basket funds and the like) to actively managed fund strategies. Usually there is a “smart” element to its genesis structural composition before it becomes fully passive.
The Vision Hill Benchmark Framework
Presented below (where sufficient data was available), are what we believe are comparison points of like-kind managers for the three-month periods ended March 31, 2019, December 31, 2018, September 30, 2018 and June 30, 2018. For confidentiality purposes, we are unable to disclose any specific performance numbers or specific manager names; we only present measures of central tendency and generalized brackets of performance to protect manager privacy. We also elected to solely present data for the full three months leading up to each period. Returns below are net of all management & performance fees to the best of our knowledge.
*It should be noted that these performance metrics are quarterly metrics as of a particular point in time, which represents only a limited snapshot and should not be considered as long-term indications of performance. This analysis should continue to be used as of this point in time as a . The digital asset industry remains highly volatile and in the early stages of development, and past performance is no guarantee of future results.
For the purpose of this , we had 60 unique data points to consider for the three-month period ended March 31, 2019. Out of our internal database of over 530 crypto funds and counting, we have diligenced approximately 125 funds so far as of the date of this report and found some funds were either pre-launch or launched during the first quarter of 2019 (and thus didn’t have a full quarter worth of data). For data to be presented in the aforementioned quartiles, we decided a minimum of five data points must be available for any particular strategy.
It should be noted that several crypto hedge funds voluntarily elected not to report their performance to us this quarter, and others did not yet have their finalized performance for first quarter 2019 available in time for this analysis. As we discussed in our original , we take benchmarking biases such as self-reporting bias, survivorship bias and backfill bias very seriously as it pertains to this quarterly study, and continue to manage such biases appropriately going forward.
As noted previously, we seek to provide points of reference for measuring performance among similar investment strategies, and we plan to deliver these performance statistics on a quarterly basis going forward. We are targeting mid-August 2019 for our release of the June 30, 2019 second quarter fund performance. We hope each quarterly publication continues to include more unique data points with the helpful collaborative efforts of all crypto fund managers.
A Call To Action — Help Us Build a Better Benchmark
It should be noted that we do realize these benchmark comparison points are imperfect for a variety of reasons, hence we originally proposed this as a framework at best. First, the number of unique data points we have used in this (60) continues to be relatively limited, but growing nonetheless. While typically statistically significant sample sizes warrant a minimum of 30 variables, it is our goal to continue to work with the community to collect more data over time so that future quarterly releases can grow more robust in size and fund managers can start comparing performance against reliable data points of like-kind managers and strategies. Thus, if you are a crypto fund that has not connected with us yet, are reading this, and want to contribute to helping us, please add us to your monthly and/or quarterly performance distribution list. We have set up tracking@visionhilladvisors.com for this very purpose and will look to automate this over time. Moving forward, we will look to develop a transparent opt-in system of reporting and ranking guided by community consensus and traditional market best practices.
Conclusion
In sum, we understand benchmarking is a challenging topic in the digital asset class given how early it still is. We do not believe we have a perfect solution for benchmarking and are not trying to present this piece as such. Rather, we continue to build on our existing and hope to continue to work with the community to improve this framework so that it may one day become more widely adopted by fund managers and institutional investors.
Additionally, if you have any feedback or comments surrounding how we can improve this developing benchmark, we’d love to hear from you. You can email us at info@visionhilladvisors.com with “Benchmark” in the subject line.
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Vision Hill Advisors is a digital asset focused fund of funds. Through a proprietary fund manager selection process and institutional level due diligence, Vision Hill aims to lead investors into the future of digital assets. Vision Hill brings together a team with extensive experience in traditional financial markets, a deep passion and understanding of digital asset markets, and a history of risk and portfolio management.
The content provided herein should not be considered investment advice, and is not a recommendation of, or an offer to sell or solicitation of an offer to buy, any particular security, strategy, or investment product.
Published at Thu, 16 May 2019 01:06:31 +0000
