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Interview with Carlo Scevola
Can you tell us about yourself and your journey as a fund manager?
Hermes Asset Management inc., the fund’s Investment Manager, is a subsidiary of CS&P, an international asset management and business consultancy with a twenty-year track record. Founded by Mr. Carlo Scevola in 1998, it has grown consistently since then, with 50 employees and eight offices around the world. CS&P has managed other hedge funds in the past, in various asset classes.
Mr. Carlo Scevola has been an early investor in e-currencies, since the late ’90s (e-gold etc.); he was also involved in the creation of some e-currencies in 2001-2004. He first invested in bitcoin in 2011, and in 2017 he decided to diversify into other cryptocurrencies following a strategy with a solid theoretical background. For this reason, together with Professor Igor Rivin, one of the world’s leading mathematicians, he built the www.cci30.com index and started the fund for his personal investment needs with proprietary capitals. Earlier this year the fund has opened to outside investors.
The fund has been recognized as the best performing of all in 2017 by Barclay Hedge, with a return of over 4800%, and is attracting much interest from institutional and private investors.
What are the objectives of the Cryptos Fund?
To passively replicate the CCI30 index.
How does the Cryptos Fund work?
The fund buys and holds the 30 currencies that form the CCI30 index, with the same weights as the index.
How are the cryptocurrencies included in the Cryptos Fund choose?
They are the 30 currencies that form the CCI30 index. These currencies are reweighted monthly, while every quarter the index is recomputed, so there can be changes in the list of 30.
Does the Cryptos Fund invest in ICOs?
Will the Crypto fund create other themed funds in the future?
It is possible. The next project is a fund dedicated to US investors, which we are already working on and is planned to start during Q1 2018.
How does the fund differentiate itself from other Crypto funds?
It is the first regulated fund that passively replicates a Cryptocurrencies index. The CCI30 index is now considered to be the benchmark of the sector, as the index with the most rigorous mathematical foundations, the least dependency to Bitcoin and the only that really serves as a measure of the whole Cryptocurrencies sector and that can be used as an investment tool. For these reasons, investing in the Cryptos Fund is the best way to follow the development of this entire sector, with reduced volatility and great profit potentials.
Additionally, it is by far the least expensive regulated fund available, as it only charges a 0.99% annual management fee, without any performance fee. It very much resembles to an index ETF, like the SPY is for the S&P 500.
What are the three main pros and cons of investing in the Cryptos fund rather than investing as an individual?
The pros are:
It is a regulated financial instrument, subject to the supervision of financial authorities and to audit (the auditor is Baker Tilly). As such, it also serves as an entry to the cryptocurrencies sector for those subject that are not allowed to buy cryptos directly, or that cannot do that for accounting reasons.
With one simple purchase through any bank, an investor can gain exposure to the whole cryptocurrencies sector, with minimal fees. It is unlikely that a private investor can build and keep balanced a portfolio of 30 different currencies. Furthermore, it is well proven that no investor can match or exceed the performance of an index, so it is useless, and very risky, to try to beat the market, as all honest fund managers know very well.
The fund can be viewed as a safe vehicle for storing money outside the traditional banking system. All the cryptos are held in secure cold storage by the fund, and the security procedures are managed by Maj. Jeffrey Zorn, the former military aide to the US President, with a long career in the corporate and governmental security sector.
The only con I can think of is that the liquidity of the fund is monthly. Currently, it is unrealistic to set a shorter liquidity term, as it would negatively impact the performance. But this is also a pro, as on the long term it smooths the up/down swings of the market and prevents mistakes typical of retail investors, like buying the tops and selling the dips. Cryptos Fund is a long-term investment vehicle, not an instrument for a quick speculative investment.
What are the entrance, exit and management fees to invest in the Crypto fund?
No entry fee, no exit fee, only a 0.99% annual management fee.
What happens to dividends, staking rewards or similar from the owned coins?
These are calculated according to the rules of the CCI30 index, which in this respect are similar to what happens in the S&P 500 index.
Which cryptocurrencies are the least hyped but have the most potential?
This we don’t know, as we can’t look into the future and we don’t make predictions. There are some currencies that are technically better than others, but this is of no interest for our investment strategy. By investing in a basket of the 30 largest cryptocurrencies by market cap we are sure that the next bitcoin will be part of our portfolio; and on the other side, if ever bitcoin or another coin ceases to exist or falls in value, this will have a reduced impact on the overall performance.
What are your thoughts on the CryptoCurrency market as a whole?
It has great potentials and it might still grow several times. Volatility will remain high for some time though, so it’s important to diversify in a proper way. As a medium for storing value, cryptocurrencies also target the $25tn sitting in offshore accounts, and given the decline of the banking system as a whole, and of privacy and security, in particular, it is probable that a great portion of this money will flow into cryptocurrencies, that might reach a total market cap of several $tn in a few years.