Quant Fund Manager Bets on Crypto With Brazil Startup Investment

Written by
Felipe Marques
Written by

Felipe Marques

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(Bloomberg) -- Giant Steps Capital, Latin America's biggest quantitative asset manager, bought a minority stake in a cryptocurrency-focused startup and will launch a fund to invest in futures of Bitcoin and other digital assets.

The Sao Paulo-based asset manager invested an undisclosed sum in Polvo Technologies, which develops machine-learning strategies to trade futures of Bitcoin and similar assets, Flavio Terni, a founding partner at Giant Steps, said in an interview.

Polvo's algorithms will be part of a new fund Giant Steps will launch by mid-year to trade futures of Bitcoin and Ether, according to Terni. The fund will also use other rule-based trading techniques developed by Giant Steps, which oversees almost 6.5 billion reais ($1.1 billion) in assets.

“Crypto markets are highly inefficient, with a lot of volatility,” Terni said. “That's something the trend-following strategies we already use in our other funds are able to capture and gain from it.”

Bitcoin and other cryptocurrencies have gone increasingly mainstream, embraced by financial institutions and Wall Street players. Still, volatility remains high and detractors warn prices are in a speculative bubble. Bitcoin climbed to a record $58,350 on Feb. 21, then dipped as low as $43,000 and is now hovering around $54,000.

Polvo's seven-people team builds strategies using Bitcoin's blockchain technology, which records every transaction in a public online ledger, Terni said. Giant Steps also plans to offer market-making services for crypto futures.

Giant Steps, named after the John Coltrane album, was one the first Brazilian hedge fund managers to embrace the quant-trading philosophy pioneered worldwide by Renaissance Technologies. The firm hopes to reach 10 billion reais in assets by year end, Terni said, and counts near 45 employees.

Its Zarathustra fund, which uses rules-based strategies to determine what and when to trade, thrived during last year's market turmoil, though it lost some steam when markets got calmer. The fund's strategies were designed to outperform when markets enter moments of panic or euphoria.