As the market for crypto and digital assets undergoes significant structural changes, managers are pivoting their approach to better serve their investors and the broader industry. Edouard Hindi (pictured), CIO at Tyr Capital discusses the changes the firm has been implementing.
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As the market for crypto and digital assets undergoes significant structural changes, managers are pivoting their approach to better serve their investors and the broader industry. Edouard Hindi, CIO at Tyr Capital discusses the changes the firm has been implementing.
What opportunities do you see emerging in the industry in the near future, and how are you positioning your firm to take advantage of these opportunities?
Our core competency has always been to generate alpha through our tried and tested market-neutral strategies and strong risk management. Due to the structural market changes brought about by the FTX demise, we decided to broaden our set of strategies and strengthen our risk management. This includes:
- Expanding our reach to include digital v/s traditional finance assets relative value strategies
- Strengthening our options trading desk
- Allocating a small part of our capital on less liquid trades to create asymmetric upside for our investors
- Significantly reducing counterparty risk by only trading on regulated exchanges or Copper’s Clearloop.
What is your view on the current regulatory environment for hedge funds, and how are you ensuring compliance?
There is a strong push for more scrutiny on behalf of regulators who seem to require greater transparency at least from parts of the hedge fund universe. We work closely with our local regulator (FINMA) as well as our risk and compliance service provider to ensure we meet regulatory requirements at all times. The stable and predictable environment created by FINMA has played a big role in that regard.
Has the approach to portfolio construction been changing, and how are managers managing portfolio risk in the current market environment?
We think that a change in our approach is warranted, not least because of the nascent nature of crypto. The main changes we are currently pursuing are threefold: Firstly, the addition of a wider universe of instruments, including those from traditional finance, such as listed stocks of companies exposed to crypto. Secondly, the expansion to a more diverse set of strategies, effectively adopting a multi-strat approach. And thirdly, the mitigation of counterparty risk by only trading on regulated exchanges and Clearloop enabled venues.
How are you approaching risk management, and what steps are you taking to ensure you have adequate risk controls in place?
Risk cannot be eliminated, it can only be transformed. With that in mind, we continue to implement our established risk management policy. In addition, we think that, by adhering to the regulator’s requirements, commissioning external risk management and compliance advisors and utilising the experience and expertise of the independent members of our board, we are taking all the necessary steps to implement adequate controls.
How are hedge funds managing liquidity risk, and what steps are they taking to ensure they can meet redemption requests?
We keep part of our funds’ assets in cash or cash equivalents, trade liquid instruments (spot & derivatives), use low leverage, run a diversified strategy set and closely monitor counterparties. We therefore have enough liquidity to meet medium-sized redemptions with little impact on our open positions. We have also recently put in place a clear game plan and escalation process in order to limit the effect of extreme events on our investors’ liquidity needs.
Edouard Hindi, CIO, Tyr Capital – Ed joined Deutsche Bank investment banking in 2002. He rose from the Deutsche Bank graduate program to head out the Bank’s energy proprietary trading desk. In 2008, Ed joined Geneva Energy Markets (GEM) and turned it into the biggest market maker, liquidity provider and proprietary trader in the energy space in less than two years. In 2011, Ed established the Hartree Partners’ energy arbitrage and market making business line (most profitable desks three years in a row). In 2013 Ed joined Oak Capital to expand its trading strategies across the whole commodities spectrum (headcount from 4 to 100+ during mandate). Ed graduated from Mc Gill, Canada (Bachelor of Mechanical Engineering) and INSEAD, France (MBA, 2001).
