Fabio Frontini says the manager's $4bn+ platform, built on 16 years of institutional risk management, gives it a rare edge as pension funds and other allocators move into the asset class

In 2018, Abraxas underwent a seismic transition. Spearheaded by Fabio Frontini, the fund firm shifted from trading in the traditional financial markets to focusing purely on digital assets. Frontini describes this shift as “capitalising on the incredible opportunity at that moment”. Abraxas benefited substantially from the infrastructure it had built over the previous 16 years, an advantage other digital asset firms did not have, with most relatively new to the industry. 

After the firm pivoted its focus, it had to find its feet quickly, in an environment that Frontini notes “as the wild west.” He adds, “It was hard at the start, getting our message [of robust risk management] across to the players at the time and trading with them. There was a lot of secrecy; people didn't want to disclose information, so it was very difficult to perform proper due diligence.” During this period, digital assets enjoyed large fluctuations; bitcoin rose to $20,000 at the end of 2017 before losing 62% of its gains in 2018. 

Establishing its investment universe, Abraxas positioned itself in the market-delta neutral niche through its primary flagship fund, Elysium Global Arbitrage Fund, which launched in 2018. According to Frontini, this is where “the real alpha is generated.” This focus allows the strategy to deliver absolute returns independent of directional beta exposure. Frontini adds that digital assets market has several other traits that are conducive to alpha generation, including its fragmentation, price discrepancies, liquidity constraints, and counterparty challenges. 

Abraxas now has assets over $4bn, with Frontini clear the existing team and infrastructure give the firm capacity to deploy additional capital within the same risk-adjusted framework. Its expansion has coincided with a greater array of investors being drawn to the asset class and to Abraxas’ offering. In discussions with LPs, Frontini notes that conversations can vary from people who really understand the asset to others who know very little about the space, and therefore need a “greater degree of education.”

Additionally, as the asset class and ecosystem around it has continued to evolve, so have the forces that influence price behaviour. On this topic, Frontini divides market’s transformation into two periods: before ETFs and after ETFs. “Before, it was more about narrative, adoptions, use cases, what Bitcoin is or is not, what Ethereum is or is not. Then ETFs brought retail and also institutional investors into the dynamic. Since then, it has become more correlated with more traditional risk assets” he says. 

Looking forward, Frontini believes the combination of “scale, institutional risk management, operational execution and technology” is the firm’s edge, coupled with the 16 years of traditional asset management and nearly a decade in digital assets, gives the firm a “unique perspective.” Moreover, as more institutions are drawn to the asset class, the finite number of funds able to offer the sophistication that Abraxas provides places it in a strong position to exploit growing demand and capitalise on market opportunities. 

Link to watch the full interview here.