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June 26, 2019  

Morgan Creek Marketing New Crypto Fund

Morgan Creek Capital is looking to raise $250 million for its next crypto-asset fund.

The Chapel Hill, N.C., firm has just begun talking to investors about Morgan Creek Blockchain Opportunities Fund 2, which would take venture capital positions in blockchain startups while also investing in liquid digital currencies. The fund-raising effort comes as the values of cryptocurrencies and other digital assets have risen sharply this year following last year’s market rout.

Like Morgan Creek Blockchain Opportunities Fund 1, which held a final close in February with $40 million, Fund 2 would allocate at least 70% of its assets to venture capital plays targeting companies that employ blockchain technology — including crypto-asset exchanges, database managers, lenders and software developers. The rest would be invested directly in cryptocurrencies or in hedge funds that trade digital assets.

Morgan Creek aims to close on an initial round of commitments in the third quarter.

When Morgan Creek entered the crypto market in early 2018, it initially set out to raise up to $500 million for a fund that would invest in so-called security tokens. But as the values of crypto assets fell across the board, a market for security tokens failed to emerge — prompting Morgan Creek to shift its focus to venture capital investments.

In recent months, the values of bitcoin and other liquid digital currencies have rebounded, lifting the fortunes of crypto funds that survived last year’s market turmoil. The Eurekahedge Crypto-Currency Hedge Fund Index was up 69.3% year-to-date at the end of May, following a 69.6% drop in 2018.

Morgan Creek’s first digital-asset fund is about 75% invested, including positions in hedge funds run by CoVenture and Ikigai Asset Management. Fund 1 also has deployed capital to several blockchain-focused venture capital funds run by other managers, including Pantera Capital.

Investors in Fund 1 include Fairfax County Retirement, which allocated $21 million from two pension plans it sponsors. It appears to be the first U.S. public pension system to have invested in a crypto-asset fund.

Morgan Creek’s crypto-investment unit, Morgan Creek Digital, is led by co-founder and chief investment officer Mark Yusko. The team also includes Full Tilt Capital founders Anthony Pompliano and Jason Williams, who joined in early 2018 when Morgan Creek acquired their Raleigh-based business to gain a foothold in the digital-asset sector.

Morgan Creek runs about $1.6 billion overall, mostly through multi-manager vehicles that invest in hedge funds and private equity vehicles run by others. The firm was founded in 2004 by Yusko and Mike Hennessy, formerly top executives at the University of North Carolina’s endowment.