Pension funds are reportedly backing a crypto broker that enables larger hedge fund bets on cryptocurrencies.
US aerospace and defense firm Lockheed Martin’s retirement plans are among supporters of the brokerage Hidden Road, the Financial Times reported on Wednesday, citing people familiar with the matter.
Established in 2018 by Marc Asch, who previously worked at Steve Cohen’s SAC Capital and Point72 Asset Management, Hidden Road initially concentrated on foreign-exchange offerings before venturing into the realm of digital assets.
The London-based firm is said to take its name from the Massachusetts street where Asch spent his formative years.
To manage risk, the firm uses a real-time system that sets trading limits and demands upfront collateral.
The FT reported that Hidden Road sees itself as more of a private equity outfit that raises external capital, rather than a traditional bank prime broker.
One investor reportedly characterized the firm as “prime brokering on steroids” and pointed out the risks associated with depending on external capital.
Hidden Road secured $50 million in funding in July last year from backers such as Citadel Securities and the investment units of FTX and Coinbase.
By the end of August, the broker was negotiating with leading global banks and hedge funds to assist with its crypto risk management.
Blockworks learned last year that Hidden Road faced trouble due to its involvement with FTX. Subsequently, all content was removed from its X/ Twitter page.
Hidden Road and Lockheed Martin didn’t return Blockworks’ request for comment by press time.
A crypto prime brokerage helps traders in the cryptocurrency market by providing them with leverage, similar to what traditional prime brokers do in stock markets. These brokerages extend credit to various clients like hedge funds to amplify their trading bets.
If a client incurs heavy losses, the prime brokerage or its investors may have to cover the losses.
The interest from Lockheed Martin’s retirement plan, along with others, signifies the most recent indirect foray into cryptocurrencies by pension funds looking to enhance their returns.
Nonetheless, some pension funds’ foray into crypto has not exactly been smooth. Last year, two Canadian pension funds, Ontario Teachers’ Pension Plan and CDPQ, experienced losses in their investments with FTX and Celsius.