A Word From Steve Kurz, Head of Asset Management
In 2018, we began our journey to build Galaxy Asset Management. Consistent with Galaxy as a whole, our mission was – and continues to be – to promote the responsible institutional adoption of digital assets and blockchain technology.
Our first step on that journey was to partner with Bloomberg to create the Bloomberg Galaxy Crypto Index, with the belief that the bedrock for any asset class should be transparency, consistent data, and benchmarking. Fast forward to 2022, we have expanded our crypto asset management platform to include over a dozen passive, active, and venture direct and multi-manager investment strategies. We have built and fostered institutional partnerships globally with Bloomberg, CI Financial, Invesco, Itau, VettaFi, and CAIS and have been onboarded onto and underwritten by a number of the world’s top institutional wealth platforms and investment consultants.
Like all crypto market participants over the past five years, we have witnessed profound technological changes and weathered a great deal of market volatility. We have had thousands of meetings with service providers, institutional investors, regulators, and crypto peers. In each of these meetings, we have advocated for what we viewed as the crucial puzzle pieces to build a safe operating environment through which to access crypto strategies: strong operational controls, blue chip service providers, robust risk management, institutional-grade transparency, and experienced, high integrity operating and investment teams.
As a mission-driven crypto business and firm, the events of the past week have both frustrated and disappointed us. While it will take time to understand the breadth and depth of what exactly took place, it’s clear that the above core principles were ignored. We take our fiduciary responsibility seriously. It is an operating posture we bring to the office every day because crypto is new, because crypto is volatile, and because crypto is complicated. While the FTX debacle requires all serious crypto market participants to pause and reflect, we remain confident that institutional crypto is not only possible, it is already here.
At Galaxy Asset Management, we employ a team of 11 operations, finance, legal, risk, and compliance professionals fully dedicated to our business. As a TSX-listed public company with a FINRA-registered broker-dealer and an SEC Registered Investment Advisor, our firm provides regular transparency into our financials and business operations, adheres to robust firmwide compliance policies and procedures, employs strict cybersecurity governance, and operates under the oversight of our firm’s Board of Directors and Audit Committee. As a fiduciary business, we maintain both physical and digital/informational walls between our asset management and trading businesses, and we do not cross-trade with our affiliated businesses.
As an SEC Registered Investment Advisor, we are legally required to have an independent auditor issue an opinion on our financial statements (we utilize 2 of the big 4 auditors - Deloitte and KPMG). We are also legally required to utilize Qualified Custodians to maintain and safeguard client assets. The fund assets are segregated from the assets of the custodians. Where possible, as a further risk mitigation tool, we employ a multi-custodial model for fund assets, and require insurance from our custody providers. We utilize independent unaffiliated fund administrators for all our funds, and additionally, maintain full shadow books and records which allows us to perform comprehensive NAV reconciliation.
For all our service providers, we perform initial and ongoing diligence regarding operational risks, quality of service, suitability, financial stability, and reputational standing. For our liquid passive and active funds, we have never traded client assets on exchanges. Rather, our funds access liquidity through premier OTC trading counterparties. Additionally, we do not borrow, lend, or use leverage in any capacity in our funds. Furthermore, we have built passive funds which are designed to track the NAV of the underlying asset on a 1-1 basis, via ETFs or private fund structures as opposed to listed trusts, which often exhibit premium/discount dynamics and can function poorly in times of market exuberance or distress.
We have on several occasions over the past five years sacrificed near-term commercial opportunities in favor of a more conservative approach. This conservative, fiduciary-first approach permeates every aspect of our business, from fund operations to service provider selection to our team culture. We operate this way because it’s the right thing to do, and because we take our responsibility to lead by example in the crypto space seriously.
Of all the necessary qualities of an institutional asset management business, one stands above the rest: TRUST. This is, of course, even more true for the crypto space. We look forward to redoubling our efforts to earn the trust of existing and prospective investors and partners.
While difficult to see through today’s clouded lens, the seeds of the next bull market have already been planted. This is thanks to wonderful and talented technology teams building across the crypto ecosystem, as well as the many traditional players building crypto teams, strategies, and infrastructure. These developments seemed almost impossible when we started five years ago. Today, they feel inevitable.