Academy
Fund fundamentals for digital asset investors
Written to make our own investors harder to sell to. If a structure cannot survive an informed reader, it should not survive at all.
What a fund actually is
A fund pools capital from multiple investors, appoints a manager to deploy it under a defined mandate, and issues units representing a proportional claim on the pool. Three features distinguish this from simply handing money to a trader: a mandate, independent valuation, and defined liquidity.
Money market funds and their digital equivalent
A traditional money market fund invests in short-duration, high-quality instruments to hold value stable while paying a modest yield and remaining liquid. A crypto money market fund applies the same objective ordering — preserve, then liquidity, then yield — to digital dollar markets. The instruments differ; the discipline should not.
How to read a fund factsheet
- Stated yield — Net or gross? From what observation window?
- Track record length — Has the strategy operated through a drawdown?
- Maximum drawdown — What happened when it went wrong?
- Fee structure — Management, performance, hurdle, high-water mark, operating expenses.
- Liquidity terms — Frequency, settlement, notice, gates.
- Counterparties — Custodians, venues, issuers — and failure modes.
- Valuation policy — How hard-to-price positions are valued, and by whom.
Where yield genuinely comes from
Yield is compensation for accepting risk, illiquidity, or operational burden. Ask: who is on the other side of this payment, and why are they willing to make it? If nobody can name that payer, treat the structure with extreme caution.
- Legitimate sources include funding paid by leveraged traders, protocol rewards, interest from over-collateralised borrowers, liquidity fees, and short-duration instrument income.
- Warning signs include fixed returns regardless of markets, unexplained payers, withdrawal fees that look like recruitment funnels, and rates far above observable underlying sources.
Evaluating a manager
- Ask what the worst month looked like — in specific terms.
- Check whether risk oversight is independent of return generation.
- Test the exit before the entry when possible.
- Read what is missing from marketing materials as carefully as what is present.