It’s Disclosure Time For Hedge Funds: What Bitcoiners Should Know

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Welcome to your first 13F season, bitcoiners!

Since the bitcoin
spot ETFs launched on January 11, this marks the first quarter we’ll see which investment managers have been orange-pilled (that’s Bitcoinese for people who have wholeheartedly embraced the digital asset). But, hold your applause—just because Blackrock’s iShares Bitcoin Trust, Fidelity’s Wise Origin Bitcoin Fund, or any of the other 11 spot bitcoin ETFs pops up in a filing doesn’t mean it’s necessarily cause for celebration.

We’ll get into why, but first here are the basic things you need to know about 13Fs.

A 13F is a quarterly filing required by the Securities and Exchange Commission (SEC) for institutional investment managers with at least $100 million in qualifying assets. If you’re big enough to play in this league, you have to tell the world what U.S.-traded stocks, options, and now, bitcoin ETFs, you own as of the last day of the quarter.

But remember, it’s just a snapshot. Anything bought or sold in the middle of the quarter and not held until the end of the period? Not shown. Only the holdings as they stood when the bell rang on the last day of the period need to be included in the filing.

13F filings are submitted by various types of investment managers, including hedge funds, mutual funds, index funds, and large corporations like Berkshire Hathaway
Berkshire Hathaway
. Hedge funds are known for their aggressive strategies and flexibility, aiming for high returns by taking on more risk. Mutual funds gather resources from many investors to buy a broad portfolio of stocks or bonds. Index funds track specific market barometers, such as the S&P 500, offering stable and predictable market exposure. Corporate giants like Berkshire Hathaway, wielding substantial internal investment portfolios, also join the fray. Their investment strategies span discerning stock pickers to broad diversifiers.

But here’s the important bit: not all 13F filings are created equal. They don’t all signal true investment conviction.

Take, for instance, market makers and high-frequency trading firms like Citadel Securities, Susquehanna International Group (SIG), Renaissance Technologies, and Virtu Financial
Virtu Financial
—they all have to file as well. Unlike, say, Berkshire Hathaway, where a disclosed position suggests a bullish outlook, the Citadels and SIGs of the world typically engage in rapid trading to profit from tiny differences between buying and selling prices. Their holdings often reflect high-volume trading rather than any long-term belief in the assets. So, when you’re poring over their 13Fs, take them with a grain of salt—they’re more about capturing a slice of trading volume than signaling any deep love for a particular ETF or stock.

Then there are the banks. Expect to see them list Bitcoin ETFs in their filings too, but don’t get carried away. Many banks serve as market makers, and some, like JPMorgan, might even be an Authorized Participant (AP) for the ETFs themselves. An Authorized Participant’s role is to align an ETF’s price with its underlying assets by creating or redeeming shares as needed. So, their involvement might be more about market mechanics than a bet on Bitcoin.

However, some bank disclosures may include shares held by the banks’ private wealth clients, which is a bullish signal. Though, this doesn’t mean the banks themselves are taking a position on Bitcoin or most other securities they might list in their filing, as they are largely restricted from doing so under regulations like the Volcker Rule.

So far the largest position in either the BlackRock or Fidelity bitcoin ETFs disclosed by an actively managed fund was a $40 million position by Yong Rong Asset Management, a Hong Kong-based alternative investment fund. The biggest position as a percent of a fund’s equity portfolio, according to FactSet, was taken by Context Capital Management. The LaJolla, California-based fund disclosed that 50% of its equity position was allocated to the BlackRock ETF.

The deadline to file for the first quarter is May 15.