One of the industry’s largest hedge fund managers, Chicago-based Citadel Advisors LLC, which managed $47 billion as of March 31, is “not one of the firms that may be dipping their toes into cryptocurrency,” said Zia Ahmed, a company spokesman, in an email.
However, the firm’s sister company, market maker Citadel Securities LLC, will add cryptocurrency trading, said Kenneth C. Griffin, founder and CEO of Citadel, in a March 1 Bloomberg video interview.
“I still have my skepticism, but there are hundreds and millions of people in this world today who disagree with that,” Mr. Griffin said, adding “to the extent that we’re trying to help institutions and investors solve their portfolio allocation problems, we have to give serious consideration to being a market maker in crypto.”
“It’s fair to assume that over the months to come, you will see us engage in making markets in cryptocurrency,” Mr. Griffin said.
Citadel Securities’ move to provide cryptocurrency trading makes perfect sense, said Sussex Partners’ Mr. Ghali.
“If you can provide the infrastructure, it’s like supplying the shovels and pickaxes to the industry,” he said.
Consultants are more supportive of asset owners investing in dedicated cryptocurrency funds and in other hedge fund strategies than they were a few years ago.
That’s because cryptocurrency is “an uncorrelated and diversifying asset class,” which can help performance in current rough markets, said Cliffwater’s Mr. Solarz, but he stressed that “institutional investment isn’t there yet. The first investors in crypto hedge funds were high-net-worth individuals and family offices, followed by endowments and foundations.”
“Asset owners are interested and some have set up digital asset working groups to assess the potential of cryptocurrency investment,” Mr. Solarz said, declining to name asset owners who are doing this.