Why do I want to redeem my investment from Multicoin?
Multicoin hedge fund has dropped 55% this month, primarily due to their irresponsible long positions in $SOL.Compiled by: Shenchao TechFlow
A few days ago, I attended Multicoin's monthly LP conference call. I hesitated at first about whether to write this article, as I have been a loyal investor in their hedge fund and venture fund for years. In the end, I decided to write it, and here are the main takeaways and summaries from the call, as well as the reasons why I might redeem my funds.
The Multicoin hedge fund has dropped 55% this month alone. This assumes that all assets held on FTX go to zero (frankly, given the extent of SBF's fraud that has now been exposed, this is not far from the actual recovery value).
About 10% of the fund's assets are managed on FTX, which means that another 45% of the losses come from other parts of their portfolio. The main reason for this is their irresponsible long positions in $SOL.
I believe Multicoin has been reckless in managing the fund; when things happened, they did not act quickly, and they publicly supported SBF and FTX. During the call, they discussed the reasons for their actions and decisions, and frankly, they showed little remorse for the losses incurred, which honestly sounds painful to hear.
They stated that they are the largest investors in the fund and remain committed to earning back investors' money. They indicated that even after significant downsizing, the management company's cash flow remains positive, which suggests that management fees are too high, allowing the managers to profit from these fees.
They charged substantial performance fees in previous years, which is why they are the largest investors in the fund. If they decide to close the fund, they can take this money with them (by the way, this is the industry standard).
The fund has high water mark terms, which means they must earn back losses to charge performance fees, yet they continue to charge management fees monthly.
Finally, they shared the changes they will make, namely that they will withdraw assets from exchanges at least every 48 hours, which is expected to mitigate future situations similar to FTX. However, they did not address their strategy of irresponsibly holding large concentrated positions in tokens like $SOL, which has a much greater drag on performance than the decline caused by the FTX failure.
By the way, other large positions held by Multicoin (publicly disclosed): $ETH, $HNT, $MATIC, and $FIL.
The performance of the Multicoin fund has essentially tracked the performance of Solana, which has been declining since last November. They have a 2-year lock-up period for investors before December 2021, and for investors who invested after January 2022, they can only redeem 12.5% each quarter.
