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

Rayne Steinberg
Oct 5, 2021
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.
 
image (34)
(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.
 
Arca Highlights
  • Team grows to 35 members increasing resources across all departments
  • AUM exceeds $500 million
  • Launches two new actively managed funds - Arca Digital Yield Fund and Arca Endeavor Fund
  • Arca Labs partners with Securitize to facilitate the issuance of ArCoin and bring future tokenized financial products to market.
Arca Company Growth 
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.
 
Arca Funds Growth
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 Growth
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.
 
Digital Asset Growth
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 Signature
 
Rayne Steinberg, CEO    
 
To learn more or talk to us about investing in digital assets and cryptocurrency call us now at (424) 289-8068.  

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This commentary is provided as general information only and is in no way intended as investment advice, investment research, a research report or a recommendation. Any decision to invest or take any other action with respect to the securities discussed in this commentary may involve risks not discussed herein and such decisions should not be based solely on the information contained in this document. Statements in this communication may include forward-looking information and/or may be based on various assumptions. The forward-looking statements and other views or opinions expressed herein are made as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated and there is no guarantee that any particular outcome will come to pass. The statements made herein are subject to change at any time. Arca Funds disclaims any obligation to update or revise any statements or views expressed herein.
 
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An investment in any strategy, including any strategy described herein, involves a high degree of risk. There is no guarantee that the investment objective will be achieved. Past performance of these strategies is not necessarily indicative of future results. There is the possibility of loss and all investment involves risk including the loss of principal. Securities of the Funds are not registered with any regulatory authority, are offered pursuant to exemptions from such registration, and are subject to significant restrictions.
 
The information in this presentation was prepared by the General Partner and is believed by the General Partner to be reliable and has been obtained from public sources believed to be reliable. General Partner makes no representation as to the accuracy or completeness of such information. Opinions, estimates and projections in this presentation constitute the current judgment of General Partner and are subject to change without notice. Any projections, forecasts and estimates contained in this presentation are necessarily speculative in nature and are based upon certain assumptions. It can be expected that some or all of such assumptions will not materialize or will vary significantly from actual results. Accordingly, any projections are only estimates and actual results will differ and may vary substantially from the projections or estimates shown. This presentation is not intended as a recommendation to purchase or sell any commodity or security. The General Partner has no obligation to update, modify or amend this presentation or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, project on, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.
 
This presentation is strictly confidential and may not be reproduced or redistributed in whole or in part nor may its contents be disclosed to any other person without the express consent of Arca.
 
The description herein of the approach of Arca and the targeted characteristics of its strategies and investments is based on current expectations and should not be considered definitive or a guarantee that the approaches, strategies, and investment portfolio will, in fact, possess these characteristics.  These descriptions are based on information available as of the date of preparation of this document, and the description may change over time. Past performance of these strategies is not necessarily indicative of future results. There is the possibility of loss and all investment involves risk including the loss of principal.
 
Any holdings identified herein do not represent all of the securities purchased, sold, or recommended by Arca. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the investment in this report. Past performance does not guarantee future results. Specific companies mentioned in this report are meant to demonstrate the investment style of Arca and are not selected based on performance. The position reflected does not represent all the positions held, purchased, or sold, and in the aggregate, the information may represent a small percentage of activity.
 
The graphs, charts and other visual aids are provided for informational purposes only. None of these graphs, charts or visual aids can and of themselves be used to make investment decisions. No representation is made that these will assist any person in making investment decisions and no graph, chart or other visual aid can capture all factors and variables required in making such decisions.  Certain links, including links to other websites, are provided in this document. These links are provided as a convenience and do not imply sponsorship or approval of any of these websites or their content.
 
This presentation is strictly confidential and may not be reproduced or redistributed in whole or in part nor may its contents be disclosed to any other person without the express consent of Arca.
 
The description herein of the approach of Arca and the targeted characteristics of its strategies and investments is based on current expectations and should not be considered definitive or a guarantee that the approaches, strategies, and investment portfolio will, in fact, possess these characteristics.  These descriptions are based on information available as of the date of preparation of this document, and the description may change over time. Past performance of these strategies is not necessarily indicative of future results. There is the possibility of loss and all investment involves risk including the loss of principal.
 
Any holdings identified herein do not represent all of the securities purchased, sold, or recommended by Arca. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the investment in this report. Past performance does not guarantee future results. Specific companies mentioned in this report are meant to demonstrate the investment style of Arca and are not selected based on performance. The position reflected does not represent all the positions held, purchased, or sold, and in the aggregate, the information may represent a small percentage of activity.
 
The graphs, charts and other visual aids are provided for informational purposes only. None of these graphs, charts or visual aids can and of themselves be used to make investment decisions. No representation is made that these will assist any person in making investment decisions and no graph, chart or other visual aid can capture all factors and variables required in making such decisions.  Certain links, including links to other websites, are provided in this document. These links are provided as a convenience and do not imply sponsorship or approval of any of these websites or their content.


An investor should carefully consider the investment objectives, risks, charges, and expenses of the Arca U.S. Treasury Fund before investing. This and other information is available in the Fund’s prospectus, which should be reviewed carefully prior to investing. To obtain a prospectus, please call 1-800-445-3148
 
The Funds Annual Operating Expense Ratio, as reflected in the current prospectus is 3.22%, however Management has agreed to an expense cap of .75% through an expense limitation agreement for the first year after effectiveness of the Fund's registration statement.  For more details relating to the fund’s expenses, please review the prospectus. No assurance can be given that the Fund will achieve its investment objective, and investment results may vary substantially over time and from period to period. An investment in the Fund involves risk including loss of principal. An investment in the Fund is suitable only for investors who can bear the risks associated with limited liquidity in the shares and the uncertainty of emerging technologies, and should be viewed as a long-term investment. Other risks specifically associated with the Arca U.S. Treasury Fund are detailed in the prospectus and include no history of operations risk, conflict of interest risk, interval fund risk, no minimum amount of proceeds risk, fund closure risk, liquidity risk, tax related risks, credit and non-payment risk, interest rate risk, portfolio management risk, market risk, call risk, valuation risk and issuer risk. The Arca U.S. Treasury Fund will be one of the first registered funds to offer digital securities and there are additional risks associated with this feature of the fund, including regulatory risk, liquidity risk, emerging technology risk, operational and technology risk, and risks specifically associated with the Ethereum blockchain. There is the risk that management may be unable to successfully use blockchain technology to validate ownership and transfer ArCoin. For details regarding all of the risks described above, please review the prospectus. 
 
Arca Capital Management, LLC “Arca” serves as adviser to the Arca US Treasury Fund, distributed by UMB Distribution Services, Member FINRA/SIPC. Arca and UMB are not affiliated.

Past performance is not indicative of future results. Investors should carefully consider the investment objectives, risks, charges and expenses of funds sponsored by Arca Funds (the "Funds"). Other important information about the Funds are in each respective Fund's offering documents. A Fund's offering documents should be read carefully before investing.Arca's private fund offerings are only suitable and available to institutional investors, and investors who are Accredited Investors, Qualified Clients, and/or Qualified Purchasers.

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©2020 by Arca Funds Past performance is not indicative of future results. Past performance is not indicative of future results. Investors should carefully consider the investment objectives, risks, charges and expenses of funds sponsored by Arca Funds (the "Funds"). Other important information about the Funds are in each respective Fund's offering documents. A Fund's offering documents should be read carefully before investing. Disclaimer: This commentary is provided as general information only and is in no way intended as investment advice, investment research, a research report or a recommendation. Any decision to invest or take any other action with respect to the securities discussed in this commentary may involve risks not discussed herein and such decisions should not be based solely on the information contained in this document.