Money 2.0 Stuff: cDai the standard

Every so often a fund manager has to write to their limited partners and report on the fund’s performance. This is an asymmetric exercise: when performance has been good you tell your LPs that performance has been good and LPs are happy and you get some carry and pat yourself on your back. When performance has been bad, well, it depends on the benchmark! Sure my performance looks bad but, my Gosh, have you seen this benchmark, Mr. LP? Had you kept your funds in this particularly abstruse index your performance would have been even worse and so in that light your performance has actually been quite good and more pats on the back, please. 

Take Multicoin Capital, which, according to The Block, posted “solid 2018 results” of -32.9%. When I lie in bed each night dreaming of solid results the Ghost of 32.9% Drawdown very rarely appears, but then Bitcoin lost 73.6% of its value over the same period so perhaps 32.9% loss isn’t actually quite as bad as it seems? And then take the HOLD 10 Index, a weighted composition of the top 10 crypto assets by market cap, which performed even worse over 2018, finishing the year down 79.2%. The Theory of Relativity would have you believe that Multicoin actually managed their fund with a deft touch, I think, but really it’s all about the benchmark.