Just two months after going all-in on crypto, venture firm Full Tilt Capital has been acquired by a hedge fund looking to make a big bet on blockchain.
Full Tilt, a Raleigh, N.C.-based firm focusing on seed-round investments, announced in January that it was dedicating its next fund entirely to cryptocurrency businesses. But rather than go it alone, the company will be part of Morgan Creek Capital Management, a hedge fund with more than $1 billion in assets under management.
"Morgan Creek believes blockchain to be one of the most powerful and valuable technologies to have been developed in the digital age and also believes that the disruptive power of the application of blockchain technology across all asset classes will create enormous investment opportunities," Mark Yusko, founder and chief investment officer at Morgan Creek, said last week. "To fully capitalize on this compelling opportunity, Morgan Creek has acquired Full Tilt Capital."
Terms of the deal weren't available.
Blockchain's decentralized ledger technology has caught Wall Street's attention because it could vastly reduce costs while speeding up trade clearing and settlement times. Big tech is also interested. Last week, Bloomberg reported that Alphabet Inc.'s Google is working on a way to use blockchain technology to support its cloud business.
As part of the acquisition, Morgan Creek is planning to raise as much as $500 million in a new fund focused solely on blockchain investments. The firm is betting that it will see demand not only from high-net-worth investors, but also from endowments, foundations and pension funds. The $500 million would represent roughly 25% of assets under management if it raises the full amount.
Anthony Pompliano, managing partner at Full Tilt, said the new fund's strategy will be to focus on transactions executed through blockchain technology. One such opportunity the team is said to be looking into is turning the equity of a New York hotel into tokens that investors could buy. (He declined to name the hotel.) Other possibilities would be turning debt or equity in a company into tokens.
"We're encouraged by the potential blockchain can bring to financial markets," said Mr. Pompliano, who will remain at the firm after the takeover. "Although this is new, we're excited to be at the forefront."
There are a number of assets that could eventually qualify as opportunities to invest in tokens, but the strategy is new and hasn't had time to build a strong track record.
There are also questions surrounding the regulatory outlook. Earlier this month, it was reported that the U.S. Securities and Exchange Commission had issued dozens of subpoenas to firms and people behind specific coin offerings that it believes might be breaking securities laws. Morgan Creek said it will work with lawyers to make sure each transaction meets SEC standards.