Digital Asset Hedge Funds
Digital asset hedge funds are some of the most prolific investors in the space, putting capital to work across various protocols, vaults, and blockchains. Each one of those touchpoints exposes assets to onchain risk. Funds have lost LP money to custody failures, protocol exploits, depegged stablecoins, oracle failures and more. The drawdown is just the beginning. What follows is the call to LPs explaining how their money was lost and why it wasn’t covered.
Risks faced
A fund typically carries a wider risk surface than a single investor because they hold a variety of positions across the market, oftentimes deploying complex, interconnected strategies. The more contracts the capital touches, the more exposure it carries.
• Smart contract exploits in any protocol holding fund capital
• Centralized exchange failure, including halted withdrawals and exchange-wide haircuts
• Stablecoin depeg on reserves, collateral and settlement assets
• ETH liquid staking and restaking token depeg
• Oracle failure and manipulation feeding a bad price into an open position
• Liquidation failure that leaves bad debt behind
• Leveraged liquidation and unrealized loss on looped strategies
• Governance takeover at a protocol holding fund assets
Relevant products
Fund Portfolio Cover is built for this. Instead of buying and managing cover protocol by protocol, a fund can cover smart contract exploits, oracle failure and manipulation, liquidation failure, governance takeover, custody risk and depeg risk in a single transaction, priced based on its own portfolio and risk profile. Over $350 million of institutional capital has been protected this way, and Fund Portfolio Cover is the only product on the market that holds up at institutional size.
Trusted by institutional allocators
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