Hedge Fund Presidio Trading to Spin Out Crypto Market Tail Risk Strategy

The tail risk investment strategy returned 560% in June as crypto markets slumped.

AccessTimeIconDec 8, 2022 at 3:47 p.m. UTC
Updated Dec 8, 2022 at 5:22 p.m. UTC
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Presidio Trading, a quantitative hedge fund focused on trading digital assets, plans to separate its crypto tail risk strategy into a standalone fund, the company said.

The decision follows the strategy’s strong performance this year, the firm said. In June, the strategy returned about 560% while the overall fund added 4%. Ether (ETH) fell 44% and bitcoin (BTC) dropped 37% in the same period.

“Many current and prospective investors in our multi-strategy fund were interested in learning about our tail risk strategy and if we could provide them with access to the strategy through a standalone vehicle,” said Christoper Kvamme, founder and CEO of Presidio Trading.

A tail risk is the chance of an investment loss due to the occurrence of a rare event. Tail risk investment strategies look to reduce overall portfolio risk by outperforming during an unexpected downturn, but do so at the cost of lower returns in a bull market.

“It's not just other funds and investors who can benefit from protection against nonlinear drops in cryptocurrency markets. I think this new fund will be valuable to the entire crypto ecosystem; exchanges, payment processors, project endowments, and really anyone with significant exposure to crypto,” Kvamme said.

The new fund will make some slight changes to the existing tail risk strategy. While the strategy can post positive returns when markets decline, its current design returns losses when digital assets are performing well. The strategy will be tweaked to provide broader protection, most likely by covering a cryptocurrency index, the firm said.

The Dallas, Texas-based firm said it is planning to open the fund to accredited investors in the first quarter of 2023, with a limited capacity of $10 million to start.


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Will Canny is CoinDesk's finance reporter.