The selloff in crypto, as well as the broader market downturn, has left Anthony Scaramucci’s SkyBridge Capital’s flagship fund of funds down 25 percent for the year through the end of July.
As markets began to recover, the multi-adviser hedge fund portfolio, called Series G, recouped some of those losses and was down 22 percent by the end of last week, Scaramucci told Institutional Investor in an interview. The market selloff’s effect on the portfolio has led to redemptions for almost half of the assets at the $2 billion fund, which Scaramucci said was the result of wirehouses putting a sell on the fund of funds “at the worst possible moment.”
Scaramucci has been an outspoken proponent of crypto, and has steered SkyBridge into several new crypto offerings since late 2020. However, that strategy accounted for only 22 percent of SkyBridge’s Series G registered fund of funds at the end of June, according to a recent letter to investors.
Skybridge’s second biggest position was Dan Loeb’s Third Point, which fell 20 percent through July and accounted for 11.3 percent of SkyBridge’s portfolio at the end of June. The fund of funds had also been an investor in Melvin Capital, which shut down this year after its failure to recover from the GameStop short squeeze that caused it to lose about 40 percent in 2021. Its other hedge fund investments included Point72, Millennium and Coatue.
The fund of fund’s biggest single crypto investment was NYDIG, a bitcoin trading platform that made up 10 percent of the fund followed by BH Digital Asset, the dedicated crypto fund of Brevan Howard, at 8 percent.
The Skybridge fund of funds didn’t have direct exposure to the big blowups of Terra Luna, Celsius, and Three Arrows Capital, according to a letter to investors, but “a contagion effect impacted all digital assets including Bitcoin and Ethereum,” which it said “are often used as collateral in the digital asset eco-system, and they were adversely impacted by forced liquidations.”
“We anticipated a bear market, but the magnitude of the recent selloff was more severe than we expected given the maturation of the asset class,” Skybridge added. The price of both Bitcoin and Ethereum has fallen more than 50 percent this year.
Scaramucci and his partners are now looking for regulation to help crypto assets recover.
“Bipartisan legislation has been introduced in the U.S. Senate to establish a clear regulatory framework for digital assets generally and Bitcoin in particular,” the letter stated. “This legislation would enshrine digital assets in our financial regulatory system.” It also made note of the fact that Bitcoin is now “squarely in the hands of the crypto-friendly CFTC.”
“Clarity on regulation will open the Bitcoin door to the biggest financial firms in the world,” it said. SkyBridge predicted that “banks and brokerage firms are increasingly faced with the choice of supporting Bitcoin or watching assets go out the door.”
Earlier, the New York Times reported that SkyBridge’s flagship fund of funds is facing almost $900 million in redemptions. Skybridge also suspended withdrawals from its smaller $230 million Legion Strategies fund, according to Bloomberg, which noted that nearly 20 percent of the fund’s investments are in private crypto offerings that are illiquid.
Scaramucci told II that the firm still has an overall gain on its investments in Bitcon and Ethereum, which it began to buy in November and December of 2020.
“Even though those are down on the year, they’re up from where we bought them,” he said. “Our average cost is around between $18,000 and $19,000 on Bitcoin, about $900 on Ethereum.”
Bitcoin was trading below $22,000 on Monday, while SkyBridge’s investment in Ethereum has fared better. It was worth more than $1,500 per coin on Monday morning.
