Hedge fund firm Marshall Wace is plotting investments in the digital asset sector, say people familiar with its plans, as booming interest in cryptocurrencies and related technologies lures large asset managers.
The London-based group, which manages $55bn in assets, will target investments in areas such as blockchain technology, payments systems for digital currencies and stablecoins, according to one of the people. The group is launching a portfolio that will scoop up stakes in privately owned digital finance companies that are at a late stage in their development, the person said.
Marshall Wace’s crypto foray comes a time of quick expansion for the industry, with an increasing number of traditional financial companies, including fund managers, banks and advisory firms building out digital asset businesses.
The firm has recently been looking to hire staff in the digital assets sector, the people said. While the new business is still at an early stage, the group plans to expand it rapidly in a move that could include other forms of investment, for instance potentially trading digital currencies. Marshall Wace declined to comment.
The expansion by Marshall Wace, which has not previously been reported, marks the latest big hedge fund to spot moneymaking opportunities in the fast-growing digital assets industry. Last year Jim Simons’ Renaissance Technologies disclosed in a filing that it could invest in bitcoin.
Brevan Howard has been shifting a small portion of its assets into crypto and its co-founder, billionaire Alan Howard, is a big backer of the sector, having recently invested in digital asset custody and trading technology firm Copper.co and crypto trading app Kikitrade.
Marshall Wace, which was founded by Sir Paul Marshall and Ian Wace in 1997, earlier this year launched a fund to invest in healthcare companies before flotation and then hold on to them after they list. The move was part of the firm’s plans to tap new sources of return in private markets.
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The new digital finance portfolio will adopt a similar approach, making late-stage venture capital investments in companies involved in the infrastructure of digital finance, one of the people said. The infrastructure around stablecoins — tokens that act as a key gateway between the conventional financial market and cryptocurrencies — is a particular area of focus for the firm.
Its new launch will be headed up by Amit Rajpal, chief executive of Marshall Wace Asia and co-founder of Indian fintech firm Niyogin, which makes loans to small businesses. Marshall Wace is still talking to potential investors in the new portfolio and the size of the launch is still unclear.
Marshall Wace’s Tops Market Neutral fund, which analyses buy and sell recommendations from about 1,000 external analysts, has gained about 11 per cent this year to the end of May.
Marshall Wace was one of a number of investors to take part in a $440m fundraising round for Circle, the US financial technology firm behind the stablecoin USD Coin, at the end of May.
A recent survey found that hedge funds expect to significantly increase their exposure to cryptocurrencies to 7.2 per cent of their assets on average in five years’ time.
However, some hedge funds remain sceptical. Paul Singer’s Elliott Management wrote to investors earlier this year that cryptocurrencies could potentially become “the greatest financial scam in history”, in a letter seen by the EuroJournal.