Michael Novogratz, co-chief investment officer of macro funds at the $55bn Fortress Investment Group, endorses Bitcoin

October 25, 2013 Leave a comment

October 24, 2013 6:46 pm

Bitcoin endorsed by top hedge fund manager

By Stephen Foley in New York

Financial advisers who gathered in New York to hear leaders of the asset management industry impart their best investment ideas for the year ahead were given a surprising tip by one prominent hedge fund manager: Bitcoin. Michael Novogratz, co-chief investment officer of macro funds at the $55bn Fortress Investment Group, used a panel discussion on the prospects for emerging markets to trumpet the much-hyped digital currency, which he said could be used as a cheaper way of transferring money in countries with weak banking systems.Even if that did not come to pass, he said, there could be money to be made from a Bitcoin bubble along the way.

Speaking after his appearance at the UBS Wealth Management CIO Global Forum in New York, Mr Novogratz said that he and another Fortress colleague had taken personal positions in the yo-yoing currency three months ago.

Fortress itself looked at the idea. The market capitalisation of the entire stock of Bitcoin in existence is $2.2bn, and Fortress decided it was too speculative an investment for its own funds.

Bitcoin was launched in 2009 by an unknown computer scientist as an alternative to government-backed currencies. The stock of “coins” is limited, growing only according to a predetermined algorithm, and its value is untethered to anything except speculators’ belief in its future growth.

“Will more and more merchants allow you to buy stuff with Bitcoin? We’ll see. My gut is yes, but you don’t need to know that to make a bet,” Mr Novogratz explained on the conference sidelines.

“There are enough libertarian . . . [anti] government guys to at least make this a bubble.”

The price of Bitcoin has soared since the US Department of Justice moved to shut Silk Road, an online marketplace for drugs and other contraband, earlier this month.

Entrepreneurs who are trying to build businesses based on Bitcoin, and those seeking licences to act as legitimate money transfer businesses, welcomed the raid as an important step in Bitcoin’s evolution from an underground currency to a potentially disruptive payments technology.

Bitcoin was trading at $124 before the raid and was $206 on Thursday.

Mr Novogratz may be the most prominent Wall Street figure to admit to dabbling in Bitcoin. Before joining Fortress in 2002, he spent 11 years at Goldman Sachs, and he is a member of the New York Federal Reserve’s investment advisory committee on financial markets.

He declined to reveal how much he had spent on Bitcoin but said: “Enough that I am smiling that it has doubled.”

Bitcoin’s other investors include the Winklevoss twins, who are also trying to launch anexchange traded fund backed by the currency. Venture capital firms have preferred to invest in entrepreneurs building Bitcoin businesses, rather than the currency itself.

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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