Digital Assets: Hong Kong’s SFC Greenlights Arrano’s Bitcoin-tracking Fund

April 29, 2020 | Digital Assets, News, Regulations

Arrano Capital took the honors as the first digital asset manager to be approved by the Securities and Futures Commission, Hong Kong.

Founded in 2019, Arrano Capital is the blockchain arm of Venture Smart Asia Limited. On April 20, Venture Smart Asia got the approval from the Hong Kong Securities and Futures Commission to launch the territory’s first regulated virtual-assets fund. (Forkast)

The approval, therefore, let Arrano Capital set up its bitcoin tracking fund, one that could invest 100% in virtual assets.

Arrano’s first bitcoin fund

Launched on Monday, April 28, Arrano Capital’s first regulated bitcoin fund is meant for professional investors in Hong Kong. SFC defined professional investors are typically institutions and high net worth individuals. The fund aims to raise US$100 million in its first year of operations. A second crypto fund is coming by the end of this year.

Moreover, the structure of the bitcoin fund is similar to traditional mutual funds. The assets are, of course, uncorrelated to traditional mainstream investments. Basically, it’s a tracker fund that matches the price of bitcoin.

Arrano is not naming the fund yet to avoid SFC’s wrath for promoting to retail investors.

“I think it is a good time to launch this fund. There is a major reduction in interest rates now and central banks are moving to QE again. And so, I do think that store value investments, such as gold and Bitcoin, are more in focus at the moment,” Arrano CIO Avaneesh Acquilla said to Private Banker.

“I think taking everything together and looking at the size of the market, looking at bitcoin as an increasingly accepted instrument, asset and network — all of the above — I think [aiming for $100 million is] reasonable,” Acquilla said in an interview to Forkast.

Regulation an advantage

As the fund is regulation-compliant, it will inspire trust in institutional investors.

Venture Smart finally won its approval for the fund after a long “back and forth” with the regulators. Ultimately, it finally agreed to a 38-page booklet of terms and conditions over and above the standard type-9 license granted for managing assets.

Though Arrano is accepting subscriptions, the fund will only go live for trading in mid-May 2020.

It will charge a 1% front-end load and a 1% annual management fee.

Why would the new fund interest institutions?

According to Acquilla, institutions would appreciate bitcoin as a store of value given the pressure on interest rates and negative-yielding public debt. They would also use bitcoin as a diversification out of traditional assets, and as a source of alpha.

Related Story:  Digital Assets: Traditional Trading Firms May Adopt Digital Assets in a Big Way – Acuiti

Image source: Arrano Capital                                                  

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