Henry Kravis is the latest titan of finance to take a shot at cryptocurrencies.
The co-founder of KKR & Co. has invested in the flagship fund of ParaFi Capital of San Francisco, according to Ben Forman, a former employee who started his firm last year to focus on digital assets. A spokeswoman for Kravis, 75, declined to comment.
Kravis joins a handful of bold-faced names who have defied mainstream skepticism to channel some of their billions into virtual currencies or the underlying blockchain technology. They include Alan Howard, Louis Bacon and Peter Thiel.
“In the high-yield markets, I used to fight to outperform the index by tens of basis points,’’ Forman said in an interview. “Crypto, on the other hand, due to its nascency, offers a tremendous amount of alpha to active managers.’’
ParaFi manages about $25 million and aims to reach $100 million by the first quarter of 2020, said Forman.
Forman, who joined KKR in 2015, worked in the credit business there and at TPG, another private-equity giant. In addition to his main responsibilities covering debt investments, Forman led KKR’s in-house research on blockchain and crypto and left the firm last year.
“While I toyed with the idea of pursuing blockchain investing within KKR, it was clear to me that the firm did not provide the optimal format to do so,” said Forman. “Instead of pursuing crypto at KKR, I wanted to build the KKR of crypto.”
Bain Capital Ventures and Dragonfly Capital Partners are among other investors in ParaFi’s fund, and the duo have also invested in ParaFi’s management company. Salil Deshpande, a partner at Bain Capital Ventures in Palo Alto, California, said some liquid crypto assets “present asymmetric return opportunities’’ and ParaFi is “well positioned to capitalize on some misunderstood investment opportunities.’’
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