Pension fund-backed Parataxis capital shakes off crypto winter with new fund

Parataxis Capital, a multi-strategy crypto investment firm that has rare backing from a US pension fund system, is launching a new fund with a long/short relative value trading strategy and $25 million to $50 million in initial committed capital, CEO Edward Chin said. CoinDesk in an interview.

Parataxis made headlines last August when Fairfax County, Virginia’s $6.8 billion pension fund, Fairfax County Retirement Systems, said it would invest $35 million in the company’s yield breeding fund. Parataxis had about $116 million in assets under management when it spoke to CoinDesk in late October — just weeks before the collapse of crypto giant FTX — and was targeting $500 million in assets for this year. Despite the increased turbulence, this return fund is up 7% since its inception last May and 1% so far this year, and Parataxis maintains $75 million in total assets, Chin said.

The new Parataxis Relative Value Momentum Fund (RVM) will use machine learning and momentum-based quantitative signals to generate returns. The dollar-neutral strategy is expected to have less risk than a purely directional approach, an important distinction in the cautious investment environment. The RVM fund was launched in response to growing institutional interest, and will initially only be available to general partners and a small group of investors. The fund will open to more investors in the near future.

Parataxis was able to avoid exposure to FTX’s collapse because of its policy of not trading on offshore exchanges, Chin said, and did not face a rush of investor redemptions. Although crypto is clearly in a bear market, the atmosphere is different from the previous one, Chin said, as the conversation turned to whether crypto would continue to exist as an asset class.

“The conversations we’re having with institutional allocators now are no longer ‘Is this going to go away’, but rather ‘We’re trying to figure out the right kind of exposure to have to the asset class’ – especially given the volatility in the market that is likely to persist,” Chin said.

Despite the challenging environment, Chin said Parataxis plans to launch a fifth fund in the second half of the year. The quantitative smart-beta strategy will come via either a US Securities and Exchange Commission-registered interval fund or exchange-traded fund (ETF). The goal would be to outperform a bitcoin portfolio.