Patrick Tan is the CEO & General Counsel of Novum Alpha, a quantitative digital asset trading firm that has launched one of Singapore’s first fully-licensed and regulated digital asset hedge funds, the Novum Alpha Global Opportunity Digital Asset Fund, managed under a Capital Markets Services license held by PIVOT Fintech.
Regulated by the Monetary Authority of Singapore, Patrick is an Authorised Representative and serves as a Portfolio Manager with PIVOT Fintech. Appointed as an Advocate & Solicitor in 2005, Patrick specialises in blockchain technology law and was previously practicing with one of Singapore’s top blockchain technology law firms. He was also a pilot with Singapore Airlines where he flew the state-of-the-art Airbus A350.
Patrick now oversees trading teams in the United Kingdom and Singapore, analysing and managing risks related to cryptocurrency trading for Novum Alpha, is a sought-after speaker at major fintech events and has his writing regularly featured in leading publications.
To find out more about his intriguing work, and how his experience as a pilot and a lawyer has shaped his current career path, we caught up with Patrick for a quick chat. Read on to find out more.
What is the Novum Alpha Global Opportunity Digital Asset Fund?
The Novum Alpha Global Opportunity Digital Asset Fund is a regulated cryptocurrency hedge fund that is registered with the Monetary Authority of Singapore and managed through a Capital Markets Services Licensed Investment Manager. The Fund represents the culmination of almost a decade of experience trading and investing in cryptocurrencies and is a long-short quantitative-discretionary fund.
What is a Long-Short Fund?
Long-short means that the Fund can take both long (bullish) positions as well as short (bearish) positions and we can take those positions simultaneously.
Although the Fund is long-biased, as we believe that the digital asset markets are still in their infancy, we also take short positions where we are of the view that specific digital assets have either become overvalued, or lack the technological or development support to justify their current price.
What is Quantitative-Discretionary?
Quantitative simply means that we use mathematical models to guide our automated trading algorithms to execute our investment strategies in the digital asset markets.
Because the digital asset markets never sleep, the bulk of all trading needs to be done automatically, and this is achieved using trading bots (computer programs) that are preset to enter and exit trades according to parameters developed from our proprietary factor models.
But given that the digital asset markets are extremely dynamic, it’s important to also cater for human intervention from time to time, for instance when we become aware of certain macro or regulatory shifts, we must have the flexibility to intervene in our trading programs to either capitalize on informational inefficiencies or price dislocations.
The digital asset markets are also highly susceptible to manipulation and given that they are still relatively inefficient, a discretionary overlay of our automated trading programs provides us with the flexibility to seize on such opportunities.
Why launch the Fund now?
We’ve been trading cryptocurrencies using our own capital for almost a decade and been providing managed accounts for almost five years now.
In 2018, we wanted to launch a digital asset hedge fund, as we foresaw that regulation would eventually come to this space, but service providers at the time, especially for custodial services, had not yet caught up with the rapid development of the market and could not provide us with what we needed to properly execute our trading strategies.
Instead, we offered clients managed account services, which allowed us to use APIs (Application Programming Interfaces) to remotely trade out of their accounts held with digital asset exchanges. Fast forward to 2021 and the landscape has vastly changed dramatically for digital assets.
Regulation is fast coming and, in some jurisdictions, has already arrived. Investors are also more savvy, and cryptocurrencies are no longer an alien concept to them, which is why the time is right to structure our offering to cater to institutional and accredited investors.
Furthermore, service providers have moved ahead in leaps and bounds and are now able to cater for our trading strategies in ways that just weren’t possible in 2018.
What other products is Novum Alpha launching?
The Novum Alpha Global Opportunity Digital Asset Fund is only our first offering and is long-biased, which will provide more aggressive returns for investors, albeit with slightly more volatility, but is ideal as a flagship fund in a growing sector.
We also have more conservative trading strategies and will be launching a market-neutral fund in the first quarter of 2022 as our clients have asked us to do so.
This second fund will seek to profit from the volatility and inefficiency inherent in the digital asset markets but because it is market-neutral, returns are expected to be more moderate as well.
On top of the second fund, we are in the final stages of launching a listed Exchange Traded Product or ETP which will trade in the top digital assets on the SIX Swiss Exchange, together with our joint venture partner, Alset Limited, a conglomerate with interests in multiple businesses listed on the Singapore stock exchange.
The SIX Swiss Exchange is one of the largest stock exchanges in Europe and has an established, vibrant and deep digital asset ETP trading market. We chose to work with SIX because of its access to European markets, ideal location which straddles all three major time zones, including New York, London and Hong Kong and familiarity with digital assets.
What makes you different from other cryptocurrency hedge funds?
To be honest, given the current state of the digital asset markets today, there is still plenty of upside potential regardless of which fund you go with, or which strategy you pick. The difference with Novum Alpha, as our investors can attest, is that we focus on three things, transparency, education and relationship.
When you invest with Novum Alpha, we want you to understand as far as possible what it is that we do. The irony is even though the blockchain was built on the ideology of transparency, hedge funds are not, and we believe that that mindset needs to change.
When a client invests with us, we want them to know how we approach our digital asset investments, and grow with us, which is why we focus so much on education. Legendary billionaire investor Warren Buffett once said, “invest in what you know” and when it comes to digital assets, we strive to ensure our investors know as much as possible.
We believe that an investment shouldn’t just be rewarding financially, but intellectually as well, and that’s why we put so much emphasis on investor education and conduct regular seminars and create content not just for our clients, but for the community as well, as a way to give back.
Finally, when you invest with Novum Alpha, you’re investing with family. We’ve created an investor relationship program known as “The Novum Table” because when you sit at the table with us, we care for your investment the way you would for your own family’s future and fortune.
The Novum Table provides investors with unparalleled access to our schedule of events (pandemic restrictions permitting), from private dining, exclusive parties, and motorsports, to personal talks with industry insiders, thought leaders and experts.
Our thoughtfully curated investor relationship program provides investors not just an opportunity to meet portfolio managers, attend events and glean insights from industry insiders, but also to meet, know and understand the community of friends and fellow investors that make up The Novum Table.
What role does the Fund play in an investment portfolio?
The Fund is ultimately a dollar-denominated investment vehicle and therefore caters to investors who are looking to grow their existing portfolios through exposure to the digital asset class. With declining yields, rising inflation and lofty equity valuations, the Fund provides investors with an opportunity to gain from the growth of digital assets.
That having been said, an investment in the Fund is necessarily more risky than an equivalent allocation in government bonds and constitutes the growth portion of an investor’s overall portfolio. But with low correlation to other investment instruments, exposure to digital assets can help create a more diversified portfolio, with the benefits that provides.
You were a lawyer as well as a pilot, how has that helped you as the CEO of a cryptocurrency hedge fund?
Steve Jobs once famously said that “the dots connect backwards” and in my personal experience that’s been absolutely true.
I do more reading ever since I entered the digital asset space almost a decade ago, than I did in all my years of law school. Interestingly, both law and flying can be reduced to algorithms. Algorithms are essentially the series of dI do more reading in a month dealing with digital assets than I did in all my years of law school. Interestingly, both law and flying can be reduced to algorithms. Algorithms are essentially the series of decisions we make that instruct our choices – we do it all the time and every day.
The thought process that determines what we choose to eat for lunch is an example of a simple algorithm, a series of “yes” and/or “no” type instructions that produces an outcome. Flying and the practice of law are intimately intertwined with the structuring of good algorithms.
Whether it’s flying 300 passengers safely to their destination, or negotiating a contract for a client, a good pilot or lawyer needs to go input a series of instructions based on a set of rules to derive a desired outcome. The same goes for trading as well.
Algorithms help to structure the way we execute our views on the digital asset markets and it’s a process of absorbing data, responding to that data, and committing to constant improvement.
Law and flying, just like the digital asset markets, are incredibly dynamic environments.
Flying weather can change in an instant and a witness in court can inexplicably turn hostile – the same goes for the digital asset markets, where so much can be swung by seemingly so little. We cater for these externalities and exigencies by making sure that we and our algorithms are sufficiently nimble to respond to the fluid operating environment.
Where do you see the cryptocurrency space headed next?
Having been involved with digital assets for almost a decade now, I can safely say the industry has achieved exit velocity. The level of institutional interest in the digital asset sector that I’ve seen in the past eighteen months has exceeded anything that I’ve witnessed before at any time over the past decade.
Regulators are also taking a more serious look at digital assets and recognising the need to create a safe and certain environment to encourage greater participation and adoption, and that’s a good thing. Last month El Salvador was the first country in the world to make bitcoin legal tender, a move that could embolden other countries, especially those that rely heavily on remittances, to do the same.
I think we’re at a turning point when it comes to cryptocurrencies and more people are becoming aware and alive to their transformative and investment potential.
What are your plans for Novum Alpha?
Novum Alpha is the asset management arm of the Novum Group, a vertically integrated group of blockchain and cryptocurrency companies. The Novum Group is actively involved in smart contract and blockchain software development, regularly organises industry events, and produces and distributes trading applications and solutions.
I believe that investors with Novum Alpha have the added benefit of gaining access to the collective wisdom and strength of the Novum Group, which provides unique insights that help inform our trading strategies and investment theses.
We are currently developing a plethora of new and exciting regulated digital asset investment products that we believe will position us for further growth as we continue to contribute to the community that has provided us with an abundance of opportunities. I would like for Novum Alpha to continue enhancing the value we deliver to our investors, partners and stakeholders, as we contribute to the growth of the digital asset industry.