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Crypto Hedge Fund Investing

Jan 20, 2022

In this episode of Engaging Alternatives Spotlight, Elana Margulies-Snyderman, Senior Manager, Publications, EisnerAmper, speaks with Sadie Raney, Co-Founder and CEO at crypto hedge fund Strix Leviathan and Co-Founder at crypto robo advisor Makara. She discusses her outlook for crypto investing, including the greatest opportunities and challenges, her experience being a woman investment manager in the industry, what she is doing to encourage more women to manage money and how the firm is embracing DEI.


Elana Margulies-Snyderman: Hello, and welcome to the EisnerAmper Podcast Series. I'm your host, Elana Margulies-Snyderman. And with me today is Sadie Raney, co-founder and CEO at crypto Hedge Fund, Strix Leviathan, and co-founder at crypto Robo-Advisor, Makara. Today, Sadie will share with us her outlook for crypto investing, including the greatest opportunities and challenges, her experience being a woman investment manager in the industry, what she is doing to encourage more women to manage money, and how the firm is embracing DEI. Hi, Sadie. Thanks for being with me today.
Sadie Raney: Thanks for having me on, Elana.

EMS: Sadie, tell us a little about your firm and how you got to where you are today.
SR: Sure. My early career was focused on finance, accounting, and operations. I've worked in various companies, some large multi-national companies like Deloitte, which is where I started my career, and other small companies like local Seattle area businesses. After receiving my MBA at the University of Washington, I went on to work as the Financial Controller at a private cloud startup in Seattle, called Blue Box. And the founder of Blue Box, Jesse Proudman, would later become my co-founder at Strix Leviathan and Makara.

Blue Box was acquired by IBM in 2015, and I stayed on to lead the Accounting and Operations integrations into Big Blue. Jesse also stayed on and eventually was a Distinguished Engineer and shifted into IBM's Blockchain Team. Then, towards the end of 2017, Jesse approached me with the idea to start a new business together, a business that was focused on treating digital assets. I agreed almost immediately. The idea was just so interesting. And in January, of 2018, we officially launched Strix Leviathan.

Strix Leviathan is a systematic hedge fund that runs on a proprietary trading platform that we've built in house. The system includes a variety of algorithmic models with trend following, cross-sectional momentum, and short-term supply/demand imbalances. The assets that we trade include, cryptocurrencies, DeFi tokens, smart contract platforms, and decentralized applications. About a year ago, we decided to spin part of that platform out and build another crypto-focused entity, Makara, for retail investors.

Makara is an SEC-registered Robo-Advisor that allows people to gain diversified access to crypto. We create baskets of crypto based on themes, such as DeFi and Metaverse, and people can buy and hold those underlying assets in their Makara account.
EMS:Sadie, given your focus on crypto, I wanted you to share your outlook for the space in general, which is a very exciting time, right now.
SR:Yes, it definitely is a very exciting time. I think this space is fascinating and my outlook is really positive, when I think about the future of crypto and blockchain technology. The amount of innovation that we see in this space is increasing, at an astronomical rate. And it's constantly increasing. Every year, we seem to see more and more talent coming into the industry. And that's really exciting to see from our vantage point, over the last four years. And for the last four years, I've been living in crypto all day, every day. And when I think back to what it was like when we started, in January, of 2018, it just feels like a lot longer than that. Things like DeFi and yield farming weren't even thought of yet.

When we first started trading, actually, we pulled together a list of every cryptocurrency that we could find, in order to look at them and determine their suitability for trading. And I think, around that time, there was about 700 different cryptocurrencies that had white papers and information. And right now, if you did the same search, I think there's about 10 times as many. So the growth that we are seeing is just everywhere.

We see new custody and security methods, new consensus mechanisms, new peer-to-peer and finance applications coming out every day. And a lot of those days, it just feels like we're expanding things in every direction in this industry. And then, also, being a US-based corporation, we're super pleased to see that the discussions and the interest from the regulators has finally shifted. The crypto community's response, last summer, to the infrastructure bill was quite a surprise, I think, for a lot of people. And it really marked a shift in this area. Governments and investor protection organizations typically move really slowly, I'd say even glacially, compared to crypto. But the movement that we're seeing now is in the right direction. And we've been wanting to see that for a long time.
EMS:Great. And, Sadie, more specifically, where do you see the greatest opportunities right now in the space?
SR:So the speed of innovation in this space is what I think is the biggest opportunity. Everywhere you look, somebody is building something new, a new idea, a new protocol, a new consensus mechanism, or just even a new way for people to participate in the asset class. And everywhere I look, it feels like there's open space to pursue new things. And new businesses, new opportunities for building community, and new organizations are just forming at a rapid pace. And that provides even more opportunities for everyone. And the world that we live in is changing. And we see a lot of old businesses shutting down and going bankrupt. And careers at places like Sears, Roebuck are going away. And job creation is happening in crypto space at a really accelerated pace. The COVID-19 pandemic also really pushed the world into a digital transformation, faster than would be expected. And I believe that we're seeing the effects of that, now.

People and companies were forced to embrace online tools and virtual tools. And that set the stage for broader adoption of things like NFTs and the metaverse. Long-term investment in cryptocurrencies is definitely greatest opportunity I see. Social security is set to run out of its reserves in the next decade, possibly even half that time, which means it will begin to pay out less and less benefits. But it will continue to collect money from workers. And many Americans are already chasing a moving goalpost, when it comes to retirement, as the benefit age just keeps getting pushed back.

Young investors really need to look at ways to diversify their investments so they can retire someday. That said, and crypto markets are extremely risky at this early stage, and investors shouldn't put their entire wealth into them. But I do believe a conservative allocation to this industry, to get started in these markets, is a good long-term strategy.
EMS:And, Sadie, on the other hand, like you said, there are risks involved. What are some of the other challenges that this industry poses?
SR:Keeping up. Keeping up is definitely the greatest challenge that I see. In my role, I'm mostly focused on keeping up with the operational, regulatory, and risk management pieces of the space. Thankfully, we partner with both a compliance and legal firm so that we can rely on them to help us navigate all the nuances. But it definitely feels like, some days, it's a full-time job, just keeping up on those parts of what's happening in the industry, and what's changing. Then you add in all the innovations in the space, and the protocols, and the coins, and the trading. Those are a lot of things that I want to dig into. And there's just not enough time in the day to keep up-to-date on everything that's happening. There's so many different cool projects out there to learn about, and participate in, and follow.

The other major challenge is managing the risk. That's what I spend a lot of time focusing on, not just in regards to fraud, but also in regards to accidental exposure to risk. We have to diligence all of our counterparties, and we have to make sure we stay aware of what's going on, what people are doing in the industry, and investigate any risks as they arise. Just due to the nature of these markets being so immature, there are a lot of areas for people to exploit. So we can't let our guard down, ever.
EMS:Sadie being a woman money manager in this space, you're truly an inspiration. I would love for you to share your experience in this role, and what you are doing to inspire others to also foray into this space.
SR:Well, thank you for that compliment. I appreciate it. I guess you could say that I started training for this during my MBA program. There was a minority of women in my MBA program, even though I was in one that had a better ratio than most in the US. And I had my first child during my second year in the program. But I'll never forget walking back to campus, after my first summer break and seeing people's jaws drop at the site of my big stomach. I had one male classmate even make a horrified comment about me having the baby in class, as if I would do that. And I had multiple classmates ask me if I would make it through the program, or if I was planning to drop out, just because I was going to have a baby. So just to prove them wrong, I had both of my kids during my MBA. And I finished, although I did take a little bit longer than my classmates.

I also became the go-to person for our MBA Program office, whenever a female candidate expressed hesitancy about doing her MBA and being able to start a family. I spoke to dozens of women over the years that were looking at managing both. But being a female leader and a CEO in the crypto space is definitely isolating. There are not many other women in the C-Suite. So it's pretty common for me to go to an event and have people assume that I'm the plus-one. Luckily I have a super supportive husband, though. Anad he, kind of, gets a kick out of saying, "Oh no. I'm with her," when people come up to shake hands and they reach out and introduce themselves to him first. Instead of focusing on the stereotype that leads to those kinds of interactions, I just have to dig deep into my self-confidence and introduce myself to the person, and then just prove the stereotypes wrong.

I really work to grow my network of strong females in crypto and blockchain. And I try to seek out events and networks to connect with more females in finance and technology, as well as other female founders. The Female Founders Alliance, which is now the Graham & Walker Fund, and the Woodruff Sawyer's Women in Finance Series have been two great networks for me, along with a number of others.

I have come to learn that many women are interested in this space. But, in general, we are often more timid about it. So I like to remind women that, if they take the crypto out of the equation, we are all just working for companies. So you know, if they are interested in this industry, they should still pursue it. At the core, all of these companies need employees in Operations, and Marketing, and Accounting. And women shouldn't count themselves out just because they're not Blockchain Developers. I love actually having that conversation with people when they're expressing interest in this industry. And I especially love it when I can see someone start to feel more confident about their interest.
EMS:And, Sadie, as a follow-up to that, being a woman-owned firm, you've clearly incorporated DEI into the firm's culture from inception. But, as you see now, it's never been more urgent. So, first, I'd like to ask you your thoughts on what you're doing to champion this.
SR:I'm part of a D&I group in Seattle. But I'd say that's really more to keep myself educated and aware on issues and conversations as they arrive. Being a female-founded company is definitely unique, particularly in the crypto space. And it's really important to me that I don't let that blind me to potential biases. Just because I'm a female doesn't mean that I can take a pass on championing diversity, equity and inclusion. In fact, I think I have to work harder because I have to identify biases that I have, as well as any biases that my team might have.

It, honestly, could be really easy to just pat ourselves on the back and say that we've got it covered. But turning a blind eye to the topic is really the same as enabling it. So I keep a really close eye on our hiring and our employee pipeline. And I work with our HR partner to make sure that our hiring process is focused on inclusion. In some roles, it's harder to find diversity candidates, than in other roles. So, it has to be a balanced process. And when we use our process to oversee all of our hiring managers, if we host an event or build a panel, and it's not inclusive, I don't hesitate to point that out, and identify that we need more diversity in the selection of the panelists.

Intentional or not, it needs to be a conversation. And, by pointing stuff out like that, in those situations, it brings awareness across the organization and makes people think about it themselves, going forward. To set an example, I have to be willing to be unpopular, though, with some people. Thankfully, this did not happen at my company. But, at a previous company, a new hire. And, in the lunchroom, one of the managers was spreading gossip, telling everybody that this new hire was gay. And I spoke up. And I said it was inappropriate for them to be doing so. And that definitely did not make me popular with his team. But I did hear one employee on his team, later, speak up and say the same thing to some someone else.

So, while it can be uncomfortable to speak up, I think it really has to be done. And I feel very strongly about that. If something like that ever happened at our company, it would be immediately dealt with. And I should add, also, that I'm extremely grateful for my co-founder, Jesse. He has always treated me with respect and as an equal. And we can talk really openly about diversity, equity, and inclusion topics. Diversity in hiring is something that we talk about regularly. And we've advocated for more female investors on our cap table. And I know that these issues are important to him, as well. If, I ever have a concern about an employee or a situation, I don't hesitate to bring it up with him because I know it also matters to him. And it keeps the messages consistent across our organization.
EMS:Sadie, we've covered are a lot of great ground, today. So I want to see what your future plans are for your firm.
SR: So I'm really focused on managing growth, at this point in time, Strix Leviathan is about to turn four. And we have seen strong growth in our fund over the past year, in particular. We're definitely moving out of the startup phase. And that's really thrilling to see. Over the next year, we'll be adding more headcount. And I see that as a huge opportunity to add talent and diversity to our team. I focus my day-to-day energy on Strix Leviathan. And then I also provide strategic support to Makara. And Makara, our Robo-Advisory, is also growing rapidly. And that's where Jesse focuses the majority of his time.

We're adding new investors, every day, to that platform. And people are really loving the app. There seems to be really clear product market fit. So the focus on that side of the business is also continuing to grow the investor base, add new products, and integrate feature improvements that people want to see. So, as a founder, there's always a million competing priorities. But the overarching theme for 2022 is definitely going to be keeping the companies strong, as we go through the growth phase in each of them.
EMS:Sadie, thank you, so much, for sharing your perspective with our listeners.
SR:Thanks for having me, Elana.
EMS: And thank you for listening to the EisnerAmper Podcast Series. Visit for more information on this, and a host of other topics. And join us for our next EisnerAmper Podcast, when we get down to business.

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Elana Margulies-Snyderman

Elana Margulies-Snyderman is an investment industry reporter and writer who develops articles, opinion pieces and original research designed to help illuminate the most challenging issues confronting fund managers and executives.

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