Crypto Quantitative Trading
- May 11, 2023
In this episode of Engaging Alternatives Spotlight, Elana Margulies-Snyderman, Director, Publications, EisnerAmper, speaks with Barnali Biswal, CIO of Atitlan Asset Management, a U.K.-based crypto specialist asset manager with a focus on quantitative strategies and a market neutral bias. Barnali shares her outlook for investing in this space including the greatest opportunities and challenges, her experience being a woman investment manager in the industry and more.
Hello and welcome to the EisnerAmper Podcast series. I'm your host, Elana Margulies-Snyderman, and with me today is Barnali Biswal, CIO of Atitlan Asset Management, UK based Crypto Specialist Asset Manager, with a focus on quantitative strategies in a market-neutral bias. Today, Barnali will share with us her outlook for investing in this space, including the greatest opportunities and challenges, her experience being a woman investment manager in the industry and more. Hi, Barnali. Thank you so much for being with me today.
Thank you very much for having me, Elana.
Absolutely. To kick off the conversation, tell us a little about the firm and how you got to where you are today.
Sure. So, our firm at Atitlan Asset Management is a London-based regulated asset manager and investment advisor. Our multi-strategy approach is focused on a diversified portfolio of liquid crypto-quant trading strategies, that have a market-neutral bias. We are a multi-manager platform that invest in a variety of systematic trading routines. We do that both internally and externally. Our thesis is quite simple. crypto is a new and a risky asset class. We believe that a diversified portfolio of non-correlated liquid strategies that avoid directional bias have the best risk adjusted and sustainable return potential.
To the second part of your question, a bit about my background and foray into crypto. I have a very long decade plus experience in traditional capital markets, specifically in credit. 14 years of my professional career prior to crypto was spent at Goldman Sachs, trading and investing in various parts of the credit markets. Prior to leaving GS, I was responsible for their European hight-yield credit trading business. It was then I got introduced to the CEO of our firm, Yuval Reisman, who I have to give the credit that persuaded me to look closer into the crypto markets beyond just the surface level interest.
Great, Barnali. It's definitely a very interesting time to be in your space. So, given your focus on crypto investing via quantitative strategies and a market-neutral bias, I would love to hear your outlook for the space, looking ahead.
Sure. Indeed very interesting times as well. crypto markets, in my view, are a rare ground floor opportunity. They are also very volatile and risky. Given the market events that in 2022, involving Terraluna followed by FTX and the accompanying severe credit contraction and deleveraging, it's quite understandable that now many investors are extremely cautious. However, what sets the current crypto bear market apart from all the previous ones, is that despite all the negative news of the past few months, most sophisticated investors are of the view that the asset class is established, and is here to stay. We believe that a lot of the excess built into the system over the past few years, have actually now been cleansed and the survivors still standing are of much higher quality, and therefore prospect.
In the near term, I suspect the markets will remain jittery and beholden to macro factors alongside risks like regulatory overreach in the US, US effective unbanking of crypto. But in the long term, underlying engine of value creation, which is still humming along, will drive growth and mainstream adoption. Better solutions with regard to counterparty risk management and market structure will become widely available as the market continues to mature. We also remain quite optimistic on the US regulatory front, in fact. This could provide a tailwind if a broad framework were to come into force in the immediate term.
Great, Barnali. Given the backdrop, where do you see some of the greatest specific opportunities looking ahead and why?
It's interesting because in the crypto markets there is a very clear disconnect between the actual and the perceived risk. This specific gap has been further exacerbated due to the actions of some bad actors in this space, and the resulting aggressively negative tone adopted by the mainstream media. Crypto markets in 2023 are not what they used to be back in 2015. The market has in fact matured substantially. Thus, there are pockets of activity that can be effectively used to risk manage and underwrite investing pieces. This risk gap that I'm talking about, of the actual risk that can be managed and underwritten, and the perceived excessive risk, is what provides the greatest opportunity in my mind, where savvy investors can reap very attractive risk-adjusted returns, compared to anything else out there. Without taking outsized market directional risk.
Barnali, on the other hand, what are some of the greatest challenges looking ahead and why?
Sure. It is in fact a challenging environment we are having this discussion. In my view, crypto is severely under-indexed on experience. Given the fact that crypto sits at that very sensitive cross-section of money, power structures, privacy and trust, I worry that many of the crypto natives, while extremely creative, may continue to self-inflict rules in their effusive evangelical bent. There are many well-established best practices from traditional finance that should be adopted by this industry. Taking anti-establishment rhetoric to an extreme and undercutting wisdom learnt on the road, is value destructive and ultimately delays the market from reaching its own full potential.
In that regard, lack of self-regulation in the absence of actual regulation from the authorities in place, may further harm investor confidence. So, in short, finding the right balance between the attitude of crypto natives and the traditional finance mindset, will be a big challenge in the near to intermediate term. Secondly, the challenges relating to operations will likely be the biggest hurdle in the very near term. Adding to the picture of crypto de-banking in the US for example. Without an insurance market and trustworthy custody, settlement solutions, operational due diligence, which is actually quite involved and non-standardized in crypto, it'll continue to remain critical. Additional regulatory actions, especially in the US, can cause other logistical problems.
Barnali, to shift gears a little bit with ESG top of mind for the industry, I wanted to see how your firm is addressing this important topic.
Indeed. This is a complex topic when it comes to crypto industry as a whole. From environmental point of view, the industry itself is moving in a more sustainable direction. Example, being proof of work to proof of POS model, managing mining costs, et cetera, come to mind. In part, because the investor sentiments surrounding this issue is coming to front and center. The social and governance aspects are more nuanced, as they are largely not fully understood yet and/or require a unified set of rules and regulations. For us specifically at Atitlan, the ESG issue is even more tangential because we do not take direct or directional positions in the tokens or companies, we are market-neutral. However, we closely follow the developments in this space, and attempt to curate our trading universe accordingly.
Barnali, being a woman money manager, you're clearly an inspiration in this business, and I'd love to hear your experience and what you're doing to inspire the next generation.
First of all, thank you for your kind words, Elana. Diversity of talent is value creative in any industry, and that's no different for money management. Though I feel we've come a long way, we certainly need more women in the decision-making roles for risk and money management. When it comes to crypto, this issue is even more pronounced with really very few female PMs in the space. Given my long career at Goldman as a female trader and risk manager, who successfully rose through the ranks to be a managing director, responsible for a substantial almost a billion of balance sheet for client-facing credit business, I am no stranger to being one of the very few women in a room of traders or PMs. But even for me, crypto seems especially male dominated. This clearly needs to change. I am involved with several women's networks within both crypto as well as STRATFI, where my goal is to educate other female talent, both young and established ones, about the new space and the potential it holds.
Barnali, we've covered a tremendous amount of ground today, so I wanted to hear what your future plans are for the firm.
Sure. So, we aspire, as Atitlan, aspires to make crypto an asset class that's actually investible, by aligning it with institutional grade standards. We want to become the go-to investment solution provider for liquid institutional money. We're currently in the process of expanding our multi-strat model by further building out our desk of internal PMs. We're also squarely focused on testing and adopting nextgen counterparty risk management and post-trade solutions, which will provide the adequate safety guardrails for our investors.
Barnali, I wanted to thank you so much for sharing your perspective with our listeners.
Thank you very much for having me, Elana.
Thank you for listening to the EisnerAmper Podcast series. Visit eisneramper.com for more information on this, and a host of other topics. Join us for our next EisnerAmper Podcast, when we get down to business.
Transcribed by Rev.com
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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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