Abraxas Builds $4 Billion Digital-Asset Platform

Abraxas shifted from trading in traditional financial markets to focusing on digital assets in 2018. The firm now manages more than $4 billion, according to Fabio Frontini, who led the transition.

Frontini said Abraxas had 16 years of institutional risk-management and operational experience before entering digital assets. That infrastructure helped the firm assess counterparties and trading venues in a market with limited disclosure, uneven systems and sharp price swings.

“It was hard at the start, getting our message [of robust risk management] across to the players at the time and trading with them,” Frontini said. “There was a lot of secrecy; people didn’t want to disclose information, so it was very difficult to perform proper due diligence.”

Abraxas launched the Elysium Global Arbitrage Fund in 2018. The fund uses a market-delta-neutral strategy, seeking returns from trading opportunities rather than from the direction of digital-asset prices. Frontini identified market fragmentation, price differences between venues, limited liquidity and counterparty risk as factors that can create trading opportunities.

The firm began its digital-asset focus after bitcoin reached about $20,000 at the end of 2017 and then gave up 62% of those gains in 2018. Abraxas used the operational and risk-management systems it had built before the transition to operate through the period of market volatility.

Frontini’s discussions with limited partners now include investors with extensive digital-asset knowledge and others who need an explanation of the market and its risks. The investor base includes pension funds and other institutional allocators that are showing greater interest in digital assets.

Frontini divides the market’s development into periods before and after the introduction of exchange-traded funds. Before ETFs, investor attention centered on market narratives, adoption and the potential uses of Bitcoin and Ethereum. ETFs brought more retail and institutional investors into the market, he said, and digital assets have since become more correlated with traditional risk assets.

Frontini said Abraxas can deploy more capital within its existing risk-adjusted framework. He attributed that capacity to the firm’s scale, technology, operational systems and institutional risk controls. He also pointed to the firm’s 16 years in traditional asset management and nearly a decade in digital-asset investing.