James Hodges is the general partner and co-founder of Amphibian Capital. He is a serial entrepreneur and crypto influencer. He helped scale fintech startup MX.com from two to 28 million users.
Russ Alan Prince: What is Amphibian Capital?
James Hodges: Amphibian Capital is a market-neutral financial vehicle built to thrive in uncertain times. It is designed only for investors who want exposure to cryptocurrency as an asset class, with strong diversification & much lower volatility. At the same time, the fund is liquid with a low drawdown and low correlation to stocks, bonds, real estate, etc. Very importantly, it is for investors who are looking for attractive risk-adjusted returns. To date, the portfolio strategy has averaged 30%+ net annually and zero down quarters over 5 years.
The team running Amphibian Capital is composed of 15 individuals, with experience managing US $6 billion in assets As Amphibian Capital scales, a higher percentage of the general partner profits are allocated to impact projects.
Prince: What is a quantitative, market-neutral crypto hedge fund of funds?
Hodges: When hedge funds went mainstream in the early 1990s, dozens of billionaires were created as the strategies moved away from human emotion into intelligent, systematic trading.
Quantitative, market-neutral crypto hedge funds are designed to profit from volatility, inefficiency in the markets, and investing in infrastructure. While cryptocurrency investing can be extremely up and down, there is a lot more consistency and lower drawdown/risk through a vehicle like this because of the diversification across funds, but also because it’s not trading necessarily in the direction of price.
Amphibian Capital is a fund of funds. This means rather than being exposed to one fund, it invests across thirteen or more funds. We have researched more than 250 crypto hedge funds, deeply vetted 50, and put the top 13 in one portfolio> we anticipate that soon we will be putting the top 20 into one portfolio. We set up Amphibian Capital with an onshore feeder in Delaware, with an offshore master in the British Virgin Islands.
A lot of the crypto investment strategies produce short-term capital gains. That’s why we deploy strategies through vehicles that maximize tax efficiency and lower clients’ annual taxes.
Prince: What is the future for this type of investment approach?
Hodges: In traditional equity markets, new quantitative strategies are typically developed by firms one or two times a year. In this market, it is more like once a month. For instance, in 2020, DeFi—decentralized finance—emerged which opened up a plethora of opportunities. There is so much innovation occurring in the space that as the market grows more strategies will become available.
While new players will continue to enter the field, we expect incredible opportunities to still be available for the next five to ten years until higher saturation occurs. Because of the growth in opportunities, a fund of funds makes sense as Amphibian Capital continues to stay on top of the market as it evolves and adapts the portfolio as new strategies become available. It is a matter of taking the best crypto investment strategies and putting them together.
Russ Alan Prince is the executive director of Private Wealth magazine and chief content officer for High-Net-Worth Genius. He consults with family offices, the wealthy, fast-tracking entrepreneurs, and select professionals.