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 U.S. 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 told CoinDesk in an interview.

Parataxis made headlines in August when Fairfax County, Virginia’s $6.8 billion pension fund, the Fairfax County Retirement Systems, said it would invest $35 million in the firm’s yield farming 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, that yield fund is up 7% since its inception last Mayand 1% so far this year, and Parataxis maintains $75 million in total assets, said Chin.

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 carry 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 be available only 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 due to its policy of not trading on offshore exchanges, said Chin, and didn’t face a rush of redemptions from investors. Though crypto is obviously in a bear market, the atmosphere is different from the previous one, Chin said, when the talk had 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 disappear,’ but rather ‘We’re trying to figure out the right type of exposure to have to the asset class’ – especially due to the volatility in the market that’s likely to persist,” said Chin.

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 would come via either a U.S. Securities and Exchange Commission-registered interval fund or exchange-traded fund (ETF). The goal would be to outperform a bitcoin portfolio.

Read more: How a Crypto Quant Firm Shook Off the Bear Market – and FTX Exposure