Paul Yablon, founder of digital-focused hedge fund Room40 Capital and a former portfolio manager at Moore Capital Management, is returning all external investor capital as he reshapes the business to focus on managing proprietary funds alongside capital from a single institutional investor.

According to an investor letter seen by Bloomberg, Yablon plans to broaden Room40’s investment strategy beyond digital assets to encompass macro trading, reflecting an increasingly complex investment environment and evolving opportunities across asset classes.

Yablon is also returning to Moore Capital as a macro portfolio manager, according to a person familiar with the appointment.

In his letter to investors, Yablon highlighted growing security risks across the cryptocurrency ecosystem, pointing to last month's $6.3bn theft at Binance as an example of the challenges facing the sector. Room40 had no exposure to the incident.

He also noted that opportunities offering attractive asymmetric risk-reward profiles in crypto had become increasingly scarce.

“AI is accelerating change and uncovering new vulnerabilities that extend far beyond crypto,” Yablon wrote, adding that protecting capital now requires sustained investment in security, technology and operational expertise.

For smaller, standalone investment firms, he suggested, the resources required to maintain these capabilities have become increasingly difficult to justify.

Room40 managed approximately $262m in regulatory assets at the end of 2025, according to a regulatory filing. Since its launch in May 2022, the fund has generated an annualised return of 14.4%, Yablon told investors.

The restructuring comes against a challenging backdrop for smaller hedge fund managers, as institutional capital increasingly concentrates among larger established platforms with the resources to attract both assets and investment talent.

More than 3,100 hedge funds have closed since the beginning of 2020, according to data from Hedge Fund Research.

Yablon said the changing investment landscape requires a more flexible operating structure to capitalise on opportunities across markets.

“In my forty years on Wall Street, I have rarely seen such profound macroeconomic, technological and geopolitical uncertainty,” he wrote, arguing that the current environment presents significant opportunities for managers able to invest across multiple asset classes and maintain the infrastructure needed to support increasingly sophisticated strategies.