Pension funds, hedge funds, family offices, banks and other institutions are eager to invest in assets uncorrelated to losing stocks and bonds — and these days they're wading into strategies like cryptocurrency bankruptcy claims and interest rate trades.
After billion-dollar bankruptcies, secondary markets usually spring up to buy and sell claims by customers, vendors and investors. The newest bankruptcy claims stem from Sam Bankman-Fried's former crypto empire FTX Group, which filed for Chapter 11 in November. FTX has since been joined by other crypto bankruptcies including Genesis, BlockFi, Celsius Network and Voyager Digital.
In addition, interest-rate risk funds are attracting money from institutions. In periods of high inflation such as today, the usual negative correlation between bonds and stocks unravels, and both asset classes fall together, "which is exactly what we have seen in 2022," said Nancy Davis, founder, managing partner and CIO of Quadratic Capital Management and portfolio manager of the Quadratic Interest Rate Volatility and Inflation Hedge ETF, based in Greenwich, Conn.
"Both planks of the usual 60/40 portfolio are down for the year," she said, as the S&P 500 and the 10-year Treasury were both down close to 20% in 2022.