ClearHegde Capital from Palo Alto which offers institutional lending and structure product notes on bitcoin, and Gawah Holdings UAE, announced that it had taken an equity stake in ClearHedge Capital, one of many announcements Gawah has been making over the past few months. UNLOCK interviewed both Mr. Faraz Mehmood, Vice Chairman of Gawah Holdings and Richard Tan Founder and Managing Partner of ClearHedge to learn more.
Clear Hedge Capital is an entity that originates investor deposits and underwrites loans to Market Makers such as but not limited to Hedge Funds & other alternative investment vehicles for financing purposes including: asset growth financing, enhanced leverage, liquidity solutions, and other bespoke financing needs, based on their holdings of bitcoin. Bitcoin is the first step, as the markets for digital assets deepen Clearhedge will expand into other verticals.
Richard Tan who founded Clear Hedge Capital is not a newcomer to the game; he has 21 years of experience bridging banking, trading and structured credit and is an expert on specialty lending. Prior to Clear Hedge, Richard was the co-founder and CIO for Longfin Capital, for more than 10 years. LongFin capital is a specialty finance company that originates and underwrites direct loans to hedge funds, proprietary trading groups, and other alternative investment vehicles for financing purposes that include asset growth financing, enhanced leverage, liquidity solutions, and other bespoke financing needs. Richard’s conventional clients put together have been known to accumulate up to 51 % of market making power put together. The need for clear hedge became obvious to Richard when his conventional clients started inquiring on lending solutions for their bitcoin holdings. Where it gets interesting is how the custodians today find institutional sticky money and loans a lot more interesting then retail. And the result of the two put together is Richard in his new form.
Today Richard has launched principle protected notes (accounting for a minute level bof slippage given the quick movement of derivatives markets on bitcoi) for institutional investors which at the time of interview were yielding between 13 – 16%. Clearhedge will originate and underwrite digital currency backed wholesale cash loans of 10 million USD to 50 m USD to targeted institutions and mining groups who seek to post digital currency such as Bitcoin as collateral. Gawah Holdings Inc’s global ecosystem of partners, investments will assist in what way possible.
Richard Tan says, “There is a deep void in true institutional lending in the digital space, and we look to provide solutions to this completely untapped market segment.”
As Tan explained, “The idea for ClearHedge Capital came up when I was working at Longfin capital and my clients started to tell me how they are moving into crypto with 65% of them investing in Bitcoin and other cryptocurrencies, this gave me the idea of lending against the crypto coin. So in 2018 I founded ClearHedge Capital and will soon be signing a joint venture with one of the top US based crypto asset custodians globally.”
Mehmood reiterates, “This crypto custodian is one of the largest Bitcoin custodians on the planet, and explains, some large custodians lend towards retail customers and you never know when that money might be asked back for so you don’t have many sticky money depositors and lenders and that is why the idea of ClearHedge is fascinating.”
ClearHedge is utilizing the key strengths of all its partners, Gawah Holding for origination of capital. Richard Tan as a registered investment advisor in the USA, and the crypto asset custodian to be named soon.
For now ClearHedge will be working just with Bitcoin as it is the largest cryptocurrency and has liquidity. According to Tan in the future if Ethereum becomes as liquid as Bitcoin they will work with it as well.
Mehmood sees a lot of appetite not only in the MENA region but in the USA as well. Tan explains, “ there are a lot of institutional investors in the USA, Europe and MENA who are sitting on large deposits of Bitcoin and have no way of monetizing this, as hodlers hold on to Bitcoin and don’t want to sell so the best option is to loan with principle guaranteed.”
In terms of regulation, since ClearHedge Capital exists in the USA it follows the guidelines, and any other entity outside USA can carry out an offshore transaction as they would with a foreign brokerage account or bank, the regulation to that jurisdiction applies. Eventually if ClearHedge wishes to come to the UAE Mehmood states that ClearHedge will aim for regulation.
According to Tan, “Our biggest strength is our first mover advantage as nobody is addressing this market today. While some European banks can easily do this, they don’t have access to USA markets and vice versa so we have an advantage here. In the future once we have built a balance sheet we can take a banking license in Europe and replicate this.”
In conclusion, ClearHedge has developed a financial product that will allow traditional investors to utilize digital assets, specifically Bitcoin without the fear of volatility because of the principle protection in place. Tan states, “Lenders will feel comfortable while they participate in a new asset class far from speculation and at the same time the entrance of traditional investors into this space will bring more legitimacy to this digital asset class.”