A $4 Billion Hong Kong Family Office Makes First Crypto Foray

A money manager to some of Hong Kong's richest individuals will start investing in crypto, as more favorable regulations attract a wider array of investors to the digital-asset sector. 

VMS Group, a multifamily office with just under $4 billion in assets under management, plans to allocate up to $10 million to strategies run by decentralized-finance hedge fund Re7 Capital, said VMS managing partner Elton Cheung in an interview. He added that the size of the allocation hasn't been finalized. 

The decision is part of recent moves by VMS to diversify into more liquid investments, Cheung said. The firm has largely focused on private equity and other longer-duration strategies since it was founded two decades ago. While those investments have performed well, such types of assets have become less liquid as more companies opt to stay private for longer, making it more difficult to exit, he said.

VMS, which helps manage money for some of the city's billionaire families from property to conglomerates, runs funds that invest in various sectors including internet technology and pharmaceuticals. In 2023, it teamed up with a former executive from Chinese artificial-intelligence company SenseTime Group Inc. to look for early-stage investments in AI. 

Cheung declined to identify VMS's clients. 

Digital assets, meanwhile, have been gaining in popularity since Donald Trump was elected to the White House in November with a pro-crypto agenda that he's since begun enacting. Bitcoin has rallied about 50% since the election, and a blockbuster initial public offering by stablecoin issuer Circle Internet Group Inc. this month has added to the momentum. 

“We thought this was the right time because of growing demand and because we see clearer legislative and government support from various jurisdictions, as well as large institutional support and endorsement,” Cheung said.

Moving Into Crypto

Wealth managers are taking steps to accommodate rising crypto adoption among their clients. JPMorgan Chase & Co. plans to let wealth-management customers use some cryptocurrency-linked assets as collateral for loans, Bloomberg News reported this month. 

VMS opted to to make its crypto foray through Re7 rather than investing directly in tokens like Bitcoin to limit volatility, Cheung said. Re7 uses a market-neutral strategy through which it earns yield by providing liquidity on decentralized exchanges and by lending stablecoins — while using hedging to mitigate price swings. 

“The reason investors keep coming back to crypto is the asymmetry of risk and return,” Re7 Capital founder Evgeny Gokhberg said in an interview. “Typically, people think about asymmetry in crypto as ‘lose it all or make a 100x'.” That's “rarely a fit for a serious allocator with a reputation to lose.”

Re7 has consistently generated double-digit yields since its inception in 2021, Gokhberg said without providing exact figures. 

VMS has been also exploring partnerships with digital-asset payments and infrastructure projects, said Zhi Li, who joined VMS in London in December 2023 to lead investing in this area. That includes studying whether it can integrate crypto-based payments at a Vietnam real estate project it currently operates as majority shareholder.

“There is very strong institutional and family interest in getting regulated digital asset exposure,” Li said. “We have seen the younger generation of families wanting to do something different.”