Hong Kong's first cryptocurrency hedge fund targets the wealthy with a dividend of HK$70 million during a market crash

Hong Kong, which had been bustling for months because of the cryptocurrency industry, has finally calmed down. When Tencent News "Qianwang" met Ye Yizhou in his office in the core area of ​​Central, Hong Kong in late June, he said that he liked Hong Kong more as it is now. The previous one gave him a feeling of unreality and noise.

Ye Yizhou has been involved in cryptocurrency trading for more than 6 years and is the head of Frontier Asset Management Co., Ltd. The fund is currently the only compliant cryptocurrency hedge fund in Hong Kong and also has the best performance among those that have obtained virtual currency trading licenses in Hong Kong. Public information shows that there are now 11 funds that can invest in virtual currencies in Hong Kong.

According to Tencent News "Qianwang", Ye Yizhou's fund is the only one among the 11 funds that outperformed the market. Public data shows that Ye Yizhou's team won the third place in the net income ranking of cryptocurrency funds selected by Barclays in 2022, that is, a net return rate of 9.2% - the industry generally close to 50% loss.

At the end of 2022, the fund where Ye Yizhou worked distributed dividends of approximately HK$70 million to the fund's LPs (limited partners).

Ye Yizhou told Tencent News' "Qianwang" that during the busiest week in Hong Kong's cryptocurrency circle in April this year, he received more than 50 groups of people who came to Hong Kong to "look for opportunities in the cryptocurrency circle." These people came from the United States, Britain, mainland China, Singapore, Dubai and other places, hoping that Hong Kong could become a harbor for them to stay as "digital nomads."

These people believe that 2022 is the most difficult year for the cryptocurrency industry. Ye Yizhou and his team can make money under the supervision of Hong Kong, so Hong Kong may be worth a try. In 2022, the leading stablecoin Lunar in the cryptocurrency industry collapsed in May, and the top three exchanges in the industry FTX collapsed in November. Subsequently, Bitcoin plummeted from nearly US$40,000 in early May of that year to US$16,000.

But Ye Yizhou believes that Hong Kong is not suitable for all people in the cryptocurrency circle, or even for some people who want to enter the cryptocurrency circle from traditional finance. It is only more suitable for smart traditional financial people.

Unlike most cryptocurrency traders who were born in the grassroots, Ye Yizhou is a "regular army" trader from Wall Street. He graduated from Columbia Business School in the United States, and after graduation, he joined Fore Research & Management, a well-known hedge fund company on Wall Street at the time, and worked in convertible bond arbitrage trading for many years.

In 2014, Ye Yizhou chose to return to Hong Kong and joined a local stock hedge fund company. During this period, he started investing in Bitcoin very early because of his personal interest. He told Tencent News "Qianwang" that there was no clear regulation on Bitcoin transactions in the market at that time. He and his friends began to engage in large-scale Bitcoin secondary market transactions in 2017. Later, he resigned from the institution to start his own business and established Youli Capital Limited Management Company in Hong Kong.

Ye Yizhou said that the trading strategies of asset targets in traditional financial markets are mostly based on fundamentals, quantification, and event-driven, and these strategies can be directly transferred to cryptocurrency trading. Relatively speaking, cryptocurrency trading is easier because most participants in the cryptocurrency market are "novices", that is, they do not have professional financial and trading skills. When experts with traditional financial backgrounds enter the cryptocurrency market, they trade against these novices in the market. In the current exchanges in the global traditional financial market, except for A-shares, the ratio of professional investors to retail investors is about 8:2.

Ye Yizhou calls it the "cognitive spread" in the cryptocurrency world. In the 24-hour tradable cryptocurrency world, when traders around the world are trading the same asset at the same time, their behaviors and trading logics are very different. This also gives professional traders many opportunities to make money, which is less likely to happen in traditional finance.

Unlike most of the old people in the cryptocurrency circle, Ye Yizhou was one of the first people in Hong Kong to apply for a cryptocurrency fund license, and he obtained the license in early 2022. In early 2023, his company became the first investment institution allowed to conduct multi-strategy trading investments in cryptocurrencies in Hong Kong, the so-called hedge fund.

Ye Yizhou told Tencent News' "Qianwang" that in addition to reviewing the capabilities of fund managers, regulators will also carefully check the risk issues in multiple strategies, how to better protect the interests of investors, and the fund's own good trading records and behaviors.

Tencent News' "Qianwang" learned that more funds in the Hong Kong market now have not chosen the compliance route and are not in a hurry to apply for licenses from regulators, because these people are using their own money or their friends' money to trade and are not raising funds from outside for the time being, which is equivalent to individual investors.

Among the funds currently approved in Hong Kong, only Frontier Youli has a full fiscal year of trading records from the beginning of 2022 to the present.

Ye Yizhou told Tencent News’ “Qianwang” that as traditional financial people, he and his team have firmly chosen the “regulated” route since the first day of their establishment.

This is because Ye Yizhou hopes that his fund can be open to more institutional investors in the future. Tencent News "Qianwang" learned that the current source of funds for Qianfeng Youli, in addition to Ye Yizhou himself, also includes some high-net-worth clients, such as Li Lin, the founder of Huobi Group, a cryptocurrency exchange.

Ye Yizhou and his team have also been in contact with some old money families in Hong Kong, and even with some leading private banks, hoping to find a product channel that suits them. Ye Yizhou told Tencent News "Qianwang" that the current fundraising pressure is not great, and they are more inclined to attract wealthy groups by listing fund products from institutions or family offices.

This may be related to Ye Yizhou's traditional financial background. In addition to being biased towards regulation, he prefers to deal with institutions. In his words, this is a "batch" listing of products to cover enough wealthy groups with needs.

According to Tencent News "Qianwang", these top private banks do cover almost all the wealthy resources in Hong Kong and mainland China, but they have very strict requirements for the fund products listed, such as fund compliance, transaction records and reliable trading strategies, etc. The transaction records generally require 3 years. In the current situation in Hong Kong, the longest transaction record is only one and a half years. Ye Yizhou's fund is no exception.

If they want to follow the strict process to enter the product shelves of the top private banks, Ye Yizhou and his peers will have to wait patiently for a year and a half. However, according to Tencent News "Qianwang", some Chinese financial institutions are also actively promoting the listing of cryptocurrency funds.

Some wealthy people in Hong Kong have told Tencent News "Qianwang" that they are indeed interested in this type of regulated cryptocurrency fund products, and hope to allocate assets through institutions. In the past few years, during the wild growth of the cryptocurrency market, these wealthy people have more or less participated in some cryptocurrency investments, and these investments have all lost money without exception.