Tuesday, January 31, 2023

CFM avoided crypto risk before FTX collapse



Quant manager CFM has steered clear of crypto, viewing the sector as too risky even before the collapse of FTX and this year’s volatility.

“It was not for us, at least at this stage,” said Bouchaud on the AFI podcast. “We have been saying for many months there is a huge embedded risk in crypto.

“It is not about saying ‘I told you so’ but we were expecting and are still expecting some kind of major event that for us is unacceptable in our portfolios.”

An increasing number of systematic firms, as well as discretionary (largely multi-strategy and macro), have moved into the space in the last couple of years, but the collapse of the FTX exchange has hit sentiment.

It was reported last month, however, that Man Group was continuing with its plan to start a crypto-focused strategy led by AHL money manager Andre Rzym, possibly before year-end.

Industry sources say many firms are expected to continue with crypto plans despite the turbulence — albeit at a slower pace and with heightened risk management checks and procedures in place.

That is some way off for CFM. “We don’t want to be caught red-handed with this type of huge risk,” said Bouchaud. “There is too much uncertainty: regulation, fraud, technology — we won’t enter before it is much more mature.”