UK’s first digital currency hedge fund exiting space over lack of demand

Getting your Trinity Audio player ready...

The first licensed digital currency hedge fund set up in the United Kingdom is to close, after failing to attract the necessary levels of investment from institutional investors.

Prime Factor Capital won the approval of the Financial Conduct Authority (FCA) only in the summer of 2019, the first fund of its kind to be licensed by the U.K. regulator. However, Financial News reported that the firm is planning to close “due to insufficient demand from institutional investors.”

Founded by former executives at BlackRock, the fund had failed to live up to expectations since it was launched.

Prime Factor Capital CEO Nic Niedermowwe said that while the fund had delivered a return for its investors, the lack of institutional investment meant the fund would now be forced to close.

“We can confirm that the fund, despite having delivered an average monthly performance in excess of 4%, is being wound down due to insufficient demand from institutional investors.”

Sources close to the company have been quoted in press reports as saying that the fund “had struggled to get traction in terms of raising assets and that it tried, in the past six to 12 months, to sell a stake in the management company.”

The news is the latest blow for the digital currency investment sector in the U.K., which has thus far failed to win over significant investment from institutional partners. With digital currencies still too volatile and opaque for many regulated investors, and without sufficient investor confidence in the asset class, funds like Prime Factor Capital continue to face challenges in raising assets.

Prime Factor Capital had been anticipating an upsurge in interest from investment funds and banks, with claims of delivering solid monthly returns through its digital currency investments. But with the risk profile still too great, institutional investors continue to steer clear of speculating on digital currencies.