Crypto Hedge Fund Arca Nearly Doubles Sales for Flagship Fund Despite LUNA Exposure

Arca, a crypto hedge fund with around $500 million in assets under management, came close to doubling sales of its flagship fund in one year, even after telling investors it had been exposed to the Terra ecosystem, which collapsed in May.

The Arca Digital Assets Fund, which invests in the tokens of crypto companies, had raised $191.7 million as of Oct. 24, up from $109 million at the beginning of October 2021, the firm said in a filing this week with the U.S. Securities and Exchange Commission. The number of investors in the fund, which is still open to new investors, increased from 333 to 576 between the filings.

The type of SEC filing Arca used typically includes the amount of money investors have given the fund – or sales – though some companies instead provide the fund’s assets under management, which would reflect performance. According to Arca’s Investment Adviser registration documents, the Arca Digital Assets Fund had a $234.3 million gross asset value as of June 30.

In an investor letter sent out in May, Arca revealed exposure to Terra’s native token LUNA and its stablecoin terraUSD (UST). The algorithmic stablecoin lost its peg to the dollar in a dramatic collapse, taking LUNA with it. Arca said Digital Assets held LUNA at the time of the letter, which still predicted a recovery for the Terra tokens.

Arca manages three other funds built off the framework of the Digital Assets vehicle, according to the firm’s website: The actively managed Arca Digital Yield that had Terra’s UST as a core holding, early-stage venture capital-focused Arca Endeavor and Arca NFT for non-fungible token exposure. The funds had gross asset values of $53 million, $10 million and $24.4 million at the end of June, respectively.

Arca declined to comment on this article when contacted by CoinDesk.

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