Arca 2021 Q3 Update: Arca Passes $500m in AUM + New Hires, Funds and Partnerships

Greetings Arca Friends,

 

The digital asset ecosystem is becoming more diverse and is no longer an easily characterized monolith. If I had to choose one overarching trend it would be heightened notoriety. An increasing number of people and entities are moving past the initial excitement of Bitcoin and becoming aware of decentralized applications. DeFi, NFTs, and decentralized exchanges are top of mind for a dizzying array of audiences. This explosion of attention includes institutions, which have deployed $21 billion on crypto products and services via VC investments so far this year. Even the most traditional financial services companies have taken notice. Old-guard names like Virginia Public Pensions, Wells Fargo, and JPMorgan have all started to approach our space with varying degrees of commitment and enthusiasm. This increasing acceptance by the establishment players is exciting, but comes with another type of scrutiny - regulators are taking notice as well.

 

(Source: PitchBook)

 

Engagement by existing regulatory bodies is an undeniable sign that digital assets have arrived. The third quarter has seen the digital asset ecosystem buffeted by regulatory actions that range from the draconian and total ban of digital asset activity in China to the comparatively benign approach of the U.S. regulatory bodies. Most of these activities have been met with hand wringing and teeth-gnashing from the digital asset ecosystem. This reaction seems overblown and unreasonable as we see regulatory attention as a sign of maturity. This is an industry that is ten years old and disrupting the most regulated and entrenched part of the global economy. Regulators are learning and trying to get up to speed like the rest of our society.

 

What does this mean for Arca? It is the sweet spot for our institution-focused approach, where we are always striving to offer the best products that adhere to the highest standards regarding legal, operations, and regulatory issues. From our company's inception in 2018, we have been interacting with regulators in a constructive and methodical fashion, establishing a reciprocal relationship to further industry successes. We believe in a big-tent approach that highlights collaboration and education, with all stakeholders in today’s financial system, bringing as many as possible into our vision of the future. This includes regulators, who have the opportunity to integrate a powerful new technology into their frameworks helping us migrate towards a more connected, transparent, and democratized financial system. Raoul Pal, Founder and CEO of Real Vision, presents a balanced stance suggesting that digital asset technology provides the opportunity for regulators to level the playing field by granting unbiased access to digital asset investments. We agree that working with regulators will extend the benefits of decentralization to the broadest audience in a measured and inclusive manner.

 

We have a daily mission to live up to our company’s core value propositions - transparency, trust, and competency. The expansion of our team across all departments has helped us meet this ambitious goal. Our now 35 passionate Arca team members continue to build and strengthen our core business departments that support and enable our vision for the future:  Operations, Regulatory and Legal, Brand/Education, Portfolio, Research, Investor Relations, Innovation and Labs, and Accounting/HR.

 

The creation and launch of the Arca Digital Yield Fund and Arca Endeavor Fund (launched today) grew from the successes of our foundational fund, the Arca Digital Assets Fund, and the maturation of digital assets. We were founded by traditional investment professionals with credit and risk management backgrounds, applying much of the same strategies and techniques that have previously been proven successful to this new asset class. Our rigorous, fundamental research approach to the digital asset ecosystem allowed us to identify synergistic investment opportunities to add to our core competencies. Both new funds’ strategies were heavily tested and validated under the Arca Digital Assets Fund before being fully developed and launched. 

 

Additionally, the birth of DeFi revealed significant untapped potential in the digital asset ecosystem. High-yielding opportunities are attracting yield-starved investors to this new asset class. This potential for higher returns and the difficulty clients face accessing it themselves were the main considerations behind Arca’s new Digital Yield Fund, an actively-managed fund with minimal volatility targeting low double-digit returns. Our investment team’s deep experience in the fixed income markets uniquely positions us to identify and evaluate investment trends, themes, and opportunities. Learn more with Arca’s CIO Jeff Dorman CFA, MD Peter Hans, and Fund PM Hassan Bassiri CFA on this recorded webinar. 

 

Today we announced the launch of our latest offering, the Arca Endeavor Fund, an early-stage venture fund focused on investing in innovative founders across various segments of the digital asset ecosystem. The oversubscription of the $30 million close confirms institutional interest and their confidence in our thoughtful, research-forward approach to creating products.  Moreover, the speed at which capital was raised for our venture fund speaks to the rapid growth of our target institutional interest and traction for Arca’s brand and products. It took two months in 2021 to raise the same amount of capital it took two years to achieve starting in 2018. 

 

The Arca Endeavor Fund complements our Digital Assets Fund, exposing us to appealing pre-token, or pre-launch, projects that don’t necessarily fit our flagship product’s focus on liquid opportunities. Our experience and reputation in digital asset investing gives us the ability to identify and access the best early-stage investments. The Fund has already made two initial investments in Bitwave and Lattice and is targeting ten additional investments by the end of 2021. 

 

In the third quarter of 2021 we’ve eclipsed $500 million AUM across our expanding family of products. Our planned growth is strategically aligned to the natural progression of the industry. This growth is the result of excellence across all areas of the business, projecting out through an increasingly trusted and respected brand. Our investor relations and client engagement team is the tip of the spear, where our products meet an increasingly sophisticated investor base. Their work educating traditional financial services firms has helped us achieve this milestone, and onboard investments from the most diligent and sophisticated investors, including foundations, pensions, and endowments. We will continue to bring our clients differentiated and unique products that meet their digital asset investing needs.

 

Arca Labs, our innovation arm, continues to help mature the digital asset securities market. We continue to pioneer efforts in crucial areas of digital asset infrastructure by working with regulators on the nuances of tokenized financial products. Since registering the Arca U.S. Treasury Fund in July 2020, it remains the first and only registered ‘40 Act fund to issue shares via the blockchain. We recently partnered with Securitize, a fully digital end-to-end platform for issuing, managing, and trading digital asset securities, to facilitate the issuance of the fund’s digital shares, ArCoin. ArCoin, a digital asset security, is the first application for the BTF (Blockchain Transferred Funds) structure, and we continue to identify additional use cases including treasury management, insurance, and settlement. The partnership with Securitize and other companies who share our regulation-first approach, such as Oasis Pro, signals the beginning of like-minded companies dedicated to bringing next-generation asset management vehicles to the market. 

 

We are especially proud of Arca Labs’ achievements because they are working on the difficult problems that need to be solved for digital assets to reach their full potential. SEC-registered ‘40 Act funds represent approximately half of all assets in commingled funds worldwide. Arca Labs continues to work closely with U.S. regulators to create products designed to support the future financial system. Not only do we share knowledge, we also seek knowledge; stay tuned for the first digital asset securities survey later this year.

 

Many in the digital asset space have identified the current uptick in regulatory attention as a “crisis.” This may be true, but not in the conventional interpretation of crisis. JFK famously stated: “The Chinese use two brush strokes to write the word, ‘crisis’. One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger – but recognize the opportunity.” This is an overly simplified interpretation and the word “opportunity” is more accurately translated to mean “a turning point” in the Chinese language, but the spirit of the sentiment is the same. In times of crisis, there is great danger, but there are also opportunities for those that are prepared and nimble. A shifting regulatory environment is only one aspect of this rapidly evolving ecosystem that we are contemplating at Arca. Our balanced, patient approach puts us in a camp where we see more opportunity than danger. We are at the forefront of the charge towards a future where digital assets touch all aspects of our lives.

 

Onward and upward,

 

Rayne Steinberg, CEO    

To learn more or talk to us about investing in digital assets and cryptocurrency call us now at (424) 289-8068.