The asset management firm is betting $1 million that its cryptocurrency index fund will beat the S&P 500 over the next 10 years.
Morgan Creek Digital, the firm backed by the multibillion-dollar investment advisor Morgan Creek Capital Management, announced its bet on Thursday.
The wager is akin to one Warren Buffett made in 2007—that the S&P 500 would beat the performance of five actively managed hedge funds. Buffett won his bet last year and donated $1 million to charity.
Bitwise Asset Management, an indexer of cryptocurrencies that filed to launch an exchange traded fund based on one of their indexes, partnered with Morgan Creek Digital in August to create the Morgan Creek Bitwise Digital Asset Index and manage the fund tracking it. That fund, a basket of 10 cryptocurrencies that cover approximately 75 percent of the cryptocurrency market, is what the S&P is up against.
The bet is open to professional investors who believe cryptocurrencies are worthless or that public equities will be a better investment over the next decade. “Not only do the principals of Morgan Creek Digital disagree, but we are willing to put our money where our mouth is,” Anthony Pompliano, a founder and partner at Morgan Creek Digital Assets, said in an email.
Bitcoin, the most popular individual crypto asset and the most heavily weighted in Morgan Creek’s index, began 2017 trading under $1,000 and eventually surged to more than $19,000 in December before sliding this year. It was trading below $3,700 Thursday afternoon. Backtested, the index has lost more than 78 percent year-to-date.
Tyrone Ross Jr., the managing partner of Noblebridge Wealth in Montclair, N.J., has clients invested in crypto assets but he said he hasn't received one call or message from a panicked client since the new asset class plunged.
Other advisors, including Ric Edelman, the founder of Edelman Financial Services that has $22 billion in assets under management, have taken interest in the space. Edelman is an investor in Bitwise Asset Management.
Bitwise co-founder and CEO Hunter Horsley told WealthManagement.com in October that Edelman is “heavily” invested in both the asset management business and its fund, and will educate and support financial advisors interested in exposure to the new asset class in client portfolios. A Bitwise survey this fall (of more than 450 financial advisors) found that 83 percent had received questions from clients about cryptoassets.