Hong Kong, CHINA – The cryptocurrency markets may be in a bit of turmoil right now with investors searching for direction as Bitcoin trades well below US$7,000 and Ethereum well below US$600. At 6.30 a.m. Eastern Time, the price of Bitcoin was approximately US$6,800 and the price of Ethereum was US$580. But despite the lackluster cryptocurrency markets, some Chinese initial coin offering (ICO) funds have turned in spectacular results for the past year. Even though ICOs and cryptocurrency exchanges have been banned by Beijing, that hasn’t stopped Chinese investors and fund managers from investing in overseas ICOs and their results have been nothing short of phenomenal, beating the traditional equity and bond markets by a long shot. Based on information obtained from Chinese crypto fund managers as well as investors, we take a look at some of the best returning funds for the year to date and help you identify the trends and themes that could add to your crypto portfolio. Here’s a ranking of the top ten Chinese-backed cryptocurrency funds and their returns on investment.
1. Draper Dragon
Established in 2006, Draper Dragon has a long investment pedigree and a branding unparalleled. With offices in both Silicon Valley and Shanghai, Draper Dragon is led by seasoned investment manager Bobby Chao and has Silicon Valley legendary investor Tim Draper as a limited partner. Over the past year, Draper Dragon have been selective about the quality of the blockchain and cryptocurrency investments they took part in, with portfolio companies including Verse, a blockchain company that enables instant payments, VeChain, a leading enterprise blockchain service provider, Ledger, a blockchain and cryptocurrency security expert, messaging application Telegram and Aelf a decentralized cloud computing blockchain network. Draper Dragon’s fund based solely on its crypto portfolio returned an eye-watering 1,060 percent year-to-date.
2. Neo Global Capital
Singapore-based Neo Global Capital’s crypto portfolio includes some of the most sought-after digital token companies today. With a roster that includes such big hitters as Ontology, a distributed trust collaboration platform, crypto darling Zilliqa, a high performance smart contract platform and IoTeX a privacy centric internet-of-things platform, the fund, helmed by a seasoned panel of investors including Tony Tao, a former secretary general of NEO, dubbed “China’s Ethereum” has returned to investors 730 percent year-to-date.
3. Nirvana Capital
San Francisco-based Nirvana Capital has holdings in projects such as OmiseGO, an Ethereum-based financial inclusion and interoperability protocol and Qtum, a proof-of-stake consensus protocol. As values of both OmiseGO and QTUM have shot up astronomically, the value of Nirvana Capital’s investments have returned 729 percent to investors. Alfred Jiang, a Silicon Valley veteran and one of the most well-connected investment managers in both China and the United States is one of its founding partners.
Seoul-based #HASHED is led by Simon Kim a seasoned entrepreneur who also served as Chief Product Officer at Knowre, an ed-tech startup which was named one of the World’s Top 10 Most Innovative Companies in Education by magazine Fast Company. With a portfolio that includes all of the biggest names in the crypto world, #HASHED returned 657 percent on its investment. Some of the more notable names on #HASHED’s roster include, EXIMCHAIN, ONTology, Aelf, PundiX, Kyber Network, QuarkChain, Qtum, OmiseGO, EOS and Ethereum. #HASHED is the only fund on the list which does not consist mainly of Chinese partners or funding.
5. Fenbushi Capital
Lead by veteran investment managers Dr. Feng Xiao and Bo Shen and with adviser Vitalik Buterin, the co-founder and face of Ethereum, Fenbushi Capital’s portfolio companies include Circle, a cryptocurrency unicorn which is in early talks to apply for a U.S. banking license, cryptocurrency and blockchain asset payment enabler TenX, global blockchain enterprise solutions provider VeChain and decentralized open source cryptocurrency protocol ZCash. With a rock star portfolio, Fenbushi Capital returned 653 percent on its portfolio.
ChainFunder has seen some spectacular returns, turning in 633 percent on its portfolio. With companies like IOTA, VeChain, EOS and NEO the fund is led by Jack Zhang, an early Chinese cryptocurrency adopter who co-founded the BitAngelsClub.
7. Signum Capital
Singapore-based Signum Capital returned 629 percent on its portfolio which includes Eximchain, Aelf, OmiseGO, Zilliqa, QuarkChain, Kyber Network, TenX and Sentinel Protocol. The fund’s Singapore representative is John Ng who is a seasoned entrepreneur. Signum Capital has its hands in almost all of the major projects in Southeast Asia.
8. Metropolis VC
Helmed by founding partner Bman Lee, San Francisco-based Metropolis VC’s portfolio investments include OmiseGO, Zen protocol, a decentralized financial system and IOST, a scalable and secure blockchain app platform. The astute investments returned 572 percent on Metrpolis VC’s portfolio.
Global Blockchain Innovative Capital or GBIC is a New York-based crypto fund that is led by Chinese partners. Founding partner Richard Lee, a graduate from Columbia University in New York and his other partners have led the fund to return 516 percent on its portfolio which includes Eximchain, IoTeX, Nebulas and ICON.
10. FBG Capital
Rounding off the top ten performing crypto funds is FBG Capital. The Beijing and San Francisco-based crypto hedge fund counts Vincent Zhou as one of its founding partners. Zhou is considered one of the most well connected and visionary hedge fund managers in Asia. FBG Capital’s portfolio companies include Zilliqa, Eximchain, Aelf and Nebulas and returned 419 percent on its investment.
Despite the movements in the overall cryptocurrency markets, carefully tailored investments into some of the most promising cryptocurrency and blockchain companies have seen the value of the digital tokens issued by ICOs soar under the crypto hedge fund managers careful watch. And with the majority of these Chinese-backed funds with offices in cryptocurrency capitals such as San Francisco and Singapore, it’s no surprise that the companies which they’ve backed have been based mainly in these cities as well. Several companies were held in common by many of the top performing Chinese-backed hedge funds and names such as Zilliqa, OmiseGO, Eximchain, Aelf and VeChain were recurring names on their portfolios. Many of the advisers of some of the most successful projects also sat as advisers on other projects invested by the same crypto hedge funds, a not altogether uncommon practice as well among internet startups, where one founder’s experience was helpful to another startup.
In terms of investment themes, blockchain protocols featured large in terms of return, as did early cryptocurrency exchanges. Blockchain enterprise solutions as well as payment systems also appeared regularly on investor’s profiles. Of the over thirty crypto hedge funds studied, the poorest performing crypto hedge fund turned in a return of over 80 percent, beating the S&P500 or the Dow Jones Industrial average by a mile.
But investors looking for the heady returns of the last year will need to be more circumspect over which blockchain companies to back using their hard-earned cryptocurrencies. Cryptocurrency exchanges, which were once a strong theme have now fallen out of favor given the oversupply in this sector and blockchain logistics and supply chain solutions have struggled to execute on their promise. The number of protocols has also increased exponentially and with the likes of Bitcoin and Ethereum as the gold standards for cryptocurrencies, new cryptocurrency protocols have a steep gradient to climb. Financial services such as payment gateways and medical blockchain companies may provide some promise. Payment gateways are notoriously difficult to execute on, especially given the volatility of cryptocurrency values, but any company that is able to do so, will likely do well and may represent significant value investing at the early ICO stage. Medical blockchain companies have also been underrepresented in the holdings of the major crypto hedge funds, but given the fractured state of Chinese healthcare records, a company that is able to fix the problem in both China and the United States may realize significant value, as patients may not only benefit from the blockchain record of their medical histories, but also realize value from the tokenization of their own medical data.
Despite the challenging cryptocurrency market conditions, crypto fund managers report that there has been no real let up in the interest to conduct an ICO, with good projects still managing to receive more than ample funding and with their ICOs still being oversubscribed. According to one crypto fund manager who spoke on condition of anonymity,
“What we’re seeing is a rise in sophistication of the overall investing market. A rising tide lifts all boats and last year’s unprecedented run up of Bitcoin to over US$20,000 would have led to the outsize returns in some cases.”
“Now that we’ve returned to earth somewhat, we can focus more closely on what matters, funding and backing blockchain and crypto companies that will execute on their vision and deliver on the promise of the blockchain.”
Investors hoping to adopt a “spray and pray,” investment strategy will probably need to do a lot more due diligence moving forward.