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AA Digital: Performance Update Apr '23

Dear Alternative Investment Enthusiasts,

April continued to be dogged by the banking sector, as we watched First Republic go under as the second largest US failure in history (after Washington Mutual during the 2008 crisis) and subsequently acquired by JP Morgan. While the Biden administration continues to send signals of their dislike of the digital asset industry, two prominent presidential candidates, Ron DeSantis (R) and Robert Kennedy Jr (D), came out as supporters. Hong Kong is continuing its push to establish itself as a global digital asset hub in trying to fill the gap the US is leaving. The FTX bankruptcy team is floating the idea of re-booting the exchange, as more money has been found during the process. Furthermore, Open AI CEO Altman has raised USD 115m for their global blockchain currency project “WorldCoin”.

For the month of April, we are down an estimated -2.2%. We continue to have an annualized outperformance of 14.06% (vs BGCI) and 2.83 % (vs BTC) at a strongly reduced annualized volatility of 28.62% vs 76.76% (for BGCI) and 66.78% (for BTC). The markets have been oscillating sideways these past weeks, which we feel is positive news from the standpoint that this creates a strong basis for the next bull run. Keeping the current global macro challenges in sight, we have structured our portfolio with approx. 40% offense, 40% midfield and 20% defense positions.

Taking a step back from all of this current activity, it is a good time to again remind everyone of our investment thesis. The world is continuing its digitalization journey which started as web 1.0 in the 90s, entered web 2.0 in the early 2000s dominated by Google, Facebook and Co., and now over the past few years finds us in the web 3.0 phase. By establishing continued innovation and disruption as an investment thesis, the next key question is if, and how, this can be expressed through an investment strategy. You can harness the power of an investment thesis through the asset and/or strategy. This is where blockchain as a technology comes into play, this allocation can be within your portfolio next to web 2.0 investments through e.g., Google, Nvidia, Amazon or your venture capital investments into e.g., FinTech, SaaS, eCommerce.

When it comes to blockchain, we continue to see much wider applications throughout various industries beyond payments (albeit this itself is a solid chunk). Disruption of industries through digitalization and automation continues to occur in areas like gaming, sports, and entertainment…almost no area is untouched. This is why we have been investing in teams from the US, Europe and Asia who specialize in different sectors and/or strategies to build a diversified portfolio going beyond BTC and ETH. Many of these areas are still nascent and therefore require active scouting and managing, but can bear large returns, exceeding those of more established projects, such as BTC. This is where we see our approach in adding value to a portfolio where an investor is not likely to achieve on their own.

Marc Seidel, and your AltAlpha Strategies Team

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