Fund Structuring and Digital Assets: Considerations and Implications

The world of finance is constantly evolving, and foundational technologies such as blockchain are changing the way in which financial services will be delivered. Due to this asset managers need to be acutely aware of the implications and changes this technology will bring. And while these technologies build on the frontiers of the financial system the ability to access them in a regulated understandable vehicle is paramount.

One such ground-breaking development is the Voyager High Yield DeFi Fund, launched in 2021. This first-of-its-kind product bridges the gap between traditional fund management and the new exciting world of blockchain based finance, offering investors a chance to participate in this new asset class.

This article explores the collaborative effort that brought the Voyager High Yield DeFi Fund from concept to reality. We will highlight the crucial role played by Lima Capital’s expertise in navigating the complexities of on-chain asset management, alongside the valuable contributions of Bakari AG.


A New Financial Frontier: The Rise of Blockchain Based Finance


The traditional financial landscape is characterised by centralised systems, with governing bodies and intermediaries playing a significant role in banking, lending, and trading activities. This system has been highly successful, but it introduces inefficiencies that can lead to higher costs and forces us to use legal systems in the case of disputes. Blockchain doesn’t exactly change the need for intermediaries, but it does change who the intermediaries are and how rules are enforced. Instead of dealing with legal paperwork and people, you deal with smart contracts that run on platforms like Ethereum.

These “smart” contracts are just code that the Ethereum computer runs, what you can do with these contracts varies widely but some of the most popular uses so far is the creation of asset exchanges and lending markets. These markets are governed by their smart contracts that strictly dictate what can happen within them, there is no human discretion. This certainty gives people a huge amount of confidence when it comes to using them as you know exactly what they will do in any given situation.


The Need for a Regulated On-Chain Fund

The emergence of blockchain based finance has presented massive opportunities for investors, both investing in the platforms that enable this new paradigm and leveraging the actual smart contracts that are run by them. Yet, regulation has hindered this significantly.

Full on-chain asset management is the future. And while we aren’t there yet from a regulatory perspective there are several hybrid solutions that leverage many of the benefits of blockchain while being housed in traditional structures that provide many with comfort.

These represent the best blend of both. On-chain asset management comes with its own set of concerns and different risks that need to be mitigated. This is where companies like Lima Capital excel, with an innate understanding of traditional structuring and regulatory requirements they have provided asset managers like Bakari with the tools to navigate the world of on-chain asset management within a regulated framework.

In the same way that traditional investment vehicles can invest directly into businesses or engage in opportunities offered by financial intermediaries, the Voyager fund can invest directly into digital asset networks and further leverage smart contract-based services. This flexibility allows the Voyager Fund to participate in directional and non-directional opportunities.


Overcoming Challenges: The Team Behind The Voyager Fund


The Voyager High Yield DeFi Fund’s success relied heavily on the expertise of several key partners. As a sub-advisor to the fund, Bakari AG brought valuable expertise to the table. Their experience in financial services was instrumental in supporting the fund’s navigation of the complex blockchain landscape. Additionally, Bakari AG’s role as a trading partner for the fund ensured the execution of trades in accordance with established protocols and risk management strategies.

Lima Capital LLC, a provider of comprehensive fund structuring services, played a vital role in establishing the fund. The deep understanding of the space helped navigate the operational hurdles associated with launching a hybrid fund. This included ensuring compliance with all necessary regulations and streamlining the fund’s administration, from handling investor subscriptions to calculating NAV (Net Asset Value), that is fully audited by an independent auditor. By laying this secure foundation, Lima Capital’s contribution was essential in bridging the gap between traditional finance and the innovative world of on-chain finance.


The Future of Finance: On-Chain Asset Management


The success of the Voyager Fund serves as a valuable case study for the future of finance. Initiatives like this not only demonstrate the potential for alternative return generation but also pave the way for innovation beyond traditional financial models. The complexities of navigating this space, however, highlight the importance of expertise and strategic partnerships.

As regulation continues to accommodate the different use cases that blockchain enables, we expect to see further adoption and use of this technology. As an asset manager one needs to be aware of the implications of it. Lima Capital is well prepared to help those interested navigate this exciting future and those who strive to be one step ahead of their competition.

For those interested in exploring the potential of blockchain and similar ventures, a comprehensive understanding and a commitment to building a secure foundation are critical. Partnering with experienced companies in fund structuring and navigating complex investment landscapes can be instrumental in achieving long-term success.


Neil Mupfupi

Portfolio Risk Analyst

Neil’s professional journey includes significant roles that have honed his expertise in investment analysis. His certification in Market Concepts from Bloomberg has further enhanced his skills in market analysis and financial reporting. Previously, as a Client Executive, Neil demonstrated his capability in integrating new clients in compliance with stringent regulatory standards. His tenure as a junior corporate finance analyst provided him valuable experience in assessing the viability of investments and managing risks in demanding situations.

At Lima Capital LLC, Neil is dedicated to investment analysis, risk management, and portfolio management, ensuring adherence to both global and local regulatory frameworks. He is committed to contribute to the growth and stability of investment portfolios while maintaining a strong relationship with our clients.