Hedge Fund Volatility Vets Launch Crypto Fund as Investors Look to TradFi Pros

Michael Bodley
Michael Bodley April 14, 2022
Updated 2022/04/14 at 6:35 AM
5 Min Read
  • The startup is run by traders with experience trading volatility markets
  • Flagship fund launched in January is up marginally each month even as crypto markets have been roiled

A quantitative crypto hedge fund startup run by a longtime hedge fund professional is raising its second vehicle on the back of steady demand from institutional investors.

Ian Tousignant’s Outremont Technologies started trading its second fund last month as fundraising continues for its latest venture, as well as the firm’s startup vehicle, according to two sources with knowledge of the matter.

Its newest offering runs a so-called smart beta strategy, with limited partners betting they’ll make money in tandem with the market — if bitcoin doubles, their holdings will double.

The startup’s flagship vehicle, which launched in January, employs an automated, quantitative strategy that keys in on volatility trades, in keeping with Tousignant and his traders’ backgrounds of making money from spikes and dips in the market.

Sources were granted anonymity to discuss sensitive business dealings. Tousignant declined to comment.

The firm favors a liquid strategy focused on the top 30 coins by market capitalization that doesn’t take delta risk, or take a directional view on price moves between a derivative and its underlying asset. That said, Tousignant maintains models that allow the firm to trade “everything under the sun” including futures and other options.

Outremont last month had about $40 million of assets under management. Its roughly 12-person team suggests it expects significant inflows. Staffers are based around the world, including in Montreal, New York and Amsterdam — a setup that allows the startup more flexibility in driving alpha from crypto markets that don’t sleep.

Indeed, one source said the firm is closing on some “bigger tickets” expected to roll in later this quarter — if they haven’t already.

Tousignant has been touting his resume — including stints as a portfolio manager at Millennium Management and Hutchin Hill Capital — as deep-pocketed investors look to back up and coming crypto outfits that have traditional capital-markets experience. Its team is also working on machine-learning signals.

The firm runs about 12 strategies, including volatility arbitrage, cross-platform arbitrage and decentralized finance (DeFi) volatility arbitrage. In contrast with a fully quant, automated black-box strategy, its traders pull the trigger on each trade.

The beta fund adjusts its market exposures in keeping with the market — running lower net exposures during market downturns. Its flagship fund, meanwhile, returned a gross 30 basis points in January and 60 basis points in February as volatility — later intensified by the Russian invasion of Ukraine — roiled digital asset markets and led to steep losses at a number of prominent funds.

It imposes a $1 million minimum on limited partner checks which can be split between the two funds. There is no lockup, and quarterly redemptions are permitted with notice of 60 days under a quarterly 25% gate.

The capacity of the alpha fund is pegged around $250 million, with one source saying Tousignant is making a “calculated bet that [the firm] will grow with the capacity of the market.”

It’s worth keeping in mind, the source added, that a year ago, traders couldn’t dabble much in crypto volatility or even options on digital assets.

Other senior members of the team include Darryl Zerdy, a managing director who has previously worked for Hutchin Hill and Peace Bridge Partners. Another managing director, Anoop Dalvi, last headed the equity derivatives desk at Goldman Sachs.

Outremont’s head of operations, Sharon Liu, formerly worked for a fixed-income hedge fund, and Selim Adyel, a quantitative strategist, formerly worked for Caxton Associates and Morgan Stanley. His fellow quant strategist, Vladyslav Ivanov, spent time in the Chicago proprietary quantitative trading scene.

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