(Bloomberg) – Anthony Scaramucci, whose curiosity about cryptocurrencies began during his brief stint in Washington, now plans to orient his SkyBridge Capital toward digital assets after years of focusing on high-profile hedge funds.
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Almost half of SkyBridge’s $3.5 billion under management is tied to crypto assets like Bitcoin, the Algorand protocol, Ethereum and publicly traded crypto-related stocks, according to Scaramucci, who after 11 days of money management at his New York-based office Firm returned communications director to then-President Donald Trump in 2017. SkyBridge expects its crypto focus could help triple its assets to $10 billion, with digital assets making up the bulk of those funds. “We are so confident in this opportunity that we have adapted and repositioned the company to eventually become a leading cryptocurrency wealth manager and advisor,” Scaramucci said in an interview.
Scaramucci was addressing a SALT event co-sponsored with crypto exchange FTX this week, which is expected to draw nearly 2,000 people to the Bahamas.
Here are the comments edited at length from the interview with Scaramucci and SkyBridge executive John Darsie, who helps organize SkyBridge’s SALT conferences:
BLOOMBERG: At what point did you make the decision to switch to crypto?
ANTHONY SCARAMUCCI: We decided during the pandemic that we needed to rebuild our entire portfolio. There’s a pre-pandemic world and a post-pandemic world, and a post-pandemic world has a lot more government deficits — it has a lot more uncertainty about growth.
If you just look at 10 years of GDP growth, it’s around 1.6%, which is below trend. I’m not saying inflation will last forever, but if you want high inflation, at least temporarily — which I would define as 18 to 36 months — you need to put yourself in a position to be in very high growth-oriented places. We believe the cryptocurrency markets represent tremendous growth. It’s certainly associated with volatility, but I think over the three to five years we’d like that trajectory.
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However, a key moment for me was working in Washington because I spent some time at the Export-Import Bank. It’s hard to believe it’s been five years now, but in June 2017 I was at ExIm Bank for a meeting where Treasury officials were discussing the possible digitization of the dollar. And I was like, okay, how are you going to do that? About the blockchain.
Coming out of that meeting it was a bit of an epiphany for me: what the Winklevoss twins are talking about, what my friends like the Mike Novogratzes of the world are talking about, I need to take more seriously. So when I got fired from the White House, I came back to SkyBridge and bought the URL SkyBridgeBitcoin.com.
Our friend Michael Saylor started very large Bitcoin investments in August 2020. For SkyBridge, we made our first major investment in December, where we made approximately $270 million as a macro investment in our Series G fund. Our average price was $18,500 – this has proven to be a very good entry point. But admittedly, there was tremendous volatility. This isn’t for the faint of heart – this is a long-term, strategic decision.
JOHN DARSIE: Historically, our strategy has been more credit oriented in terms of yield. We’ve switched to different types of hedge fund managers depending on market conditions, but particularly over the last, I’d say seven or eight years, I think our focus has been much more value-driven as we’ve been trying to generate returns of around 8% to 10% % to act as a fixed income stand-in in an investor’s portfolio as traditional fixed income returns have been very poor. What we ultimately found was that we had a huge loss in the credit portion of the portfolio as a result of the pandemic.
More broadly, we simply chose to have a slightly more growth bias in structuring the fund rather than trying to allocate and replace that fixed income yield. We wanted to invest in more growth-oriented managers, both in crypto and outside of crypto.
We are obviously extremely bullish on the sector. So we decided to invest some of this capital, previously allocated to credit managers, directly into crypto assets like Bitcoin and Ethereum – but then also rotate capital into crypto asset managers like Multicoin, Polychain, Pantera and others Nature.
The Role of the SEC
BLOOMBERG: You were among the first to be rejected by the SEC regarding a bitcoin spot ETF. How do you think the SEC will deal with crypto regulation?
AS: We have taken the position that the government will be, you call it, “mama bear” regulation. They will not over-regulate the crypto space, they certainly will not under-regulate it.
We think we’re early. So if we’re right and you get a cash ETF, that opens the floodgates for more institutional and private investment. We try to get our customers to be by our side early. So that makes sense. Our application was denied along with that of Fidelity and several others. So it wasn’t specific or personal to us.
I think the SEC’s position is that because bitcoin cash trading occurs all over the world, they don’t have one-market clearing for all purchases and sales. So they fear price manipulation. But over time, because of the transparency of the markets, I think they will become more comfortable with it.
Now Big Kahuna is the Grayscale Bitcoin Trust. They have basically applied to convert their trust, which is trading at a discount. They want to convert to an ETF, which would lower their fees, but it would just be better for clients. They’re out there publicly saying if the SEC doesn’t approve it, then they have until July 1st, they’re going to file a lawsuit against the SEC.
crypto regulation
BLOOMBERG: If Grayscale files a lawsuit against the SEC, would you join it in any way or agree with it – support it in any way?
AS: The short answer to that is no, we would not be filing because we are in the process of refiling our bitcoin ETF filing with the SEC. My take is that the SEC will eventually get to the point where they will allow a cash Bitcoin ETF. So I don’t think we have to be that aggressive.
There is a frustration in the industry that our regulators seem to be behind other regulators. Now they are concerned about investor safety. So we are very much in favor of regulation. We also believe they will be on the right side, which is why we encourage our clients to jump in now before the additional waves of investor demand and post-regulatory interest come.
That’s a risky strategy – let’s just be frank with you, that’s a risky strategy. But that’s what we’re known for, okay? I want to be a swiss army knife in the markets – I want to be adaptable. I want to see where the markets are – not what they used to be or how I would like them to be – and I want to adjust our business. But we are aware of the risks in our approach.
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