Vision Hill Crypto Hedge Fund Indices - Methodology

Last updated: September 25, 2020

The Vision Hill Crypto Hedge Fund Indices are a family of crypto hedge fund indices owned and administered by Vision Hill Group Inc. The Vision Hill Crypto Hedge Fund Indices are designed to represent the overall performance of actively managed crypto and blockchain-focused hedge funds.

Vision Hill currently maintains four (4) crypto hedge fund indices.

Index Name Short Name
Vision Hill Crypto Hedge Fund Composite Index VH Composite Index
Vision Hill Crypto HF Fundamental Index VH Fundamental Index
Vision Hill Crypto HF Quantitative Index VH Quantitative Index
Vision Hill Crypto HF Opportunistic Index VH Opportunistic Index

Vision Hill segments all crypto hedge funds into one of three categories, namely: 1) Fundamental, 2) Quantitative, or 3) Opportunistic. The Vision Hill Crypto Hedge Fund Composite Index aggregates all these strategies into one index at the headline level. The VH Composite Index is designed to capture the breadth of crypto hedge fund performance across all strategies and to represent the crypto hedge fund category, as a whole.

Key Features
  • Tracks the performance of actively managed crypto and blockchain-focused hedge fund managers
  • High data integrity; self-reported GP performance only (no LP reporting)
  • Tracked, calculated, and maintained using Vision Hill proprietary models and methodology. Vision Hill is the administration agent, calculation agent, and distribution agent for all Vision Hill Indices
  • Rules-based index methodology
  • Equal-weighted and re-balanced quarterly

Guiding Principles

1. Data Integrity Vision Hill provides contribution instructions and guidelines to GPs when submitting performance data to the VisionTrack Database and the corresponding eligible Vision Hill Indices to ensure calculations are consistent with our methodologies. Vision Hill runs a disciplined tracking process and personally manages its relationships with each of the general partners contributing performance data to the indices. Data is self-reported directly to Vision Hill from these GPs (there is no LP reporting). Contributed data is reviewed internally by the Vision Hill team. Vision Hill reserves the right to exclude any data from the VisionTrack Database or to remove any individual constituent from the Vision Hill Indices at any time for any reason if it believes the data compromises the integrity of the index.
2. Diversification Each index is equal-weighted based on its individual constituents.
3. Representative The Vision Hill Indices provide proxies for the broader actively managed crypto hedge fund landscape across multiple strategies.
4. Continuity The Vision Hill Indices are responsive to the changing nature of the crypto asset class in a manner that does not completely reshape the character of the indices from year to year.

Index Segmentation

Vision Hill segments all crypto hedge funds into one of three categories, namely: 1) Fundamental, 2) Quantitative, or 3) Opportunistic. The Vision Hill Crypto Hedge Fund Composite Index aggregates all these strategies into one index at the headline level. The VH Composite Index is designed to capture the breadth of crypto hedge fund performance across all strategies and to represent the crypto hedge fund category as a whole.

The Vision Hill Crypto Hedge Fund Composite Index acts as the headline index, which includes all types of strategies. The three sub-indices (Fundamental, Quantitative, Opportunistic) divide up the constituents into their respective primary strategy classification according to Vision Hill’s proprietary methodology. These primary strategy sub-indices are designed to provide more granular relative benchmarks based on the different types of strategies employed by crypto hedge fund managers.

Vision Hill Primary Strategy Classifications

FUNDAMENTAL

Long Only – Fundamental Long Only strategies employ investment processes based on extensive, thorough, and repeatable research designed to identify a fundamental case for value, growth, or appreciation in the network or token. Various quantitative and qualitative metrics and early crypto valuation techniques are used to select cryptoassets for investment that have the potential to accrue large amounts of value. These managers find assets they have high conviction in and buy and hold these assets for an identified investment period.

Long / Short  – Fundamental Long / Short strategies similarly employ extensive research in the space, but instead of only focusing on buying and holding assets that managers believe will accrue value, they also short-sell assets that they believe are expected to decrease in value. Long / short strategies can have directional bias to the upside or downside, or can be more directionally neutral by focusing on relative value between various cryptoassets.

Multi-Strat – Fundamental Multi-Strat strategies are employed by managers that utilize multiple techniques to drive investment returns. Managers in this category often supplement their core fundamental approach with smaller allocations to quantitative strategies, or to options, derivatives, lending, staking, or other active network participation techniques to drive returns. Additionally, some managers invest in both the liquid and private / venture markets out of the same hedge fund structure in a hybrid fashion. We often see these venture investments placed into side pockets due to their generally illiquid nature for longer periods of time.

QUANTITATIVE

Directional – Quantitative Directional strategies employ sophisticated quantitative analytical techniques based on price data and various model signals to determine timing and execution of directional positioning. Models and trading utilized by managers can be fully systematic (no human intervention) or often have some discretionary overlay to interpret the signals or to continually optimize the strategy and allocations to various strategies. Directional strategies can include momentum, trend following, mean reversion, sentiment, algorithmic market making, high frequency trading, and others. Quantitative directional strategies generally maintain varying levels of net long or net short exposure to the market over various investment periods and market cycles.

Market Neutral  –  Quantitative Market Neutral strategies similarly employ sophisticated quantitative techniques and models to determine timing and execution of trades. Market Neutral strategies differ from their directional counterpart by reducing the directional exposure of the strategy to create a market neutral or zero beta exposure to the market. Market neutral strategies should have very low correlation to the directional beta of the crypto market. Market Neutral strategies normally focus on various forms of price arbitrage or market inefficiencies, including exchange arbitrage, basis arbitrage, triangular arbitrage, protocol arbitrage, interest rate arbitrage, and other forms of arbitrage.

OPPORTUNISTIC

Credit / Yield – Opportunistic Credit / Yield strategies employ traditional credit and lending business models applied as a fund strategy in the crypto space. One type of credit strategy focuses on originating fiat-based loans backed by various forms of crypto collateral (most commonly BTC). These loans are then combined in a portfolio and generate an interest rate yield for the portfolio. Another type of credit / yield strategy focuses on digital credit extended via decentralized finance (“DeFi”) protocols in the form of permission-less loans by lending, borrowing, utilizing flash loans, or yield farming various decentralized protocol tokens. Yet another example of a yield strategy includes selling covered calls to generate a fixed yield component as an overlay to an existing beta position.

Options  –  Opportunistic Options strategies employ sophisticated options trading techniques and derivatives trades to capitalize on market movements, mispricings, inefficiencies, arbitrage opportunities, volatility, or outright directional bets. Options strategies utilize the growing options markets in crypto from providers like CME, Bakkt, Genesis, LedgerX, and Deribit among others.

Index Inclusion Criteria

To be eligible for inclusion in the Vision Hill Crypto Hedge Fund Indices, a hedge fund must:

  • Contribute performance to the VisionTrack Database
  • Contribute consistent and timely performance to VisionTrack to limit self-reporting bias
  • Be structured as a hedge fund in a commingled fund structure
  • Report returns as a hedge fund, not an SMA or other managed account
  • Report monthly returns
  • Report net of all fees returns
  • Report returns in USD denomination
  • Have been actively in operation as a fund for at least 1 month with a minimum of $500k in USD assets under management

Quick Facts

Index FamilyVision Hill Crypto Hedge Fund Indices
OwnerVision Hill Group Inc.
Base Index Value100
Initial Base Index DateJanuary 1, 2018
Index DenominationUSD
Reporting StyleNet of All Fees
Index RebalancedMonthly
Index AdministratorVision Hill Group Inc.
Index Calculation AgentVision Hill Group Inc.
Calculation Frequency

Monthly estimates for index levels are published ~T+30 days after each month end. Final index level fixings are published ~T+60 days after each month end.


Example: July Index levels
Estimates: ~September 1st
Final Fixings: ~October 1st


Slight timing variations may occur depending on certain monthly factors. Estimates may be updated on an ongoing basis until final index fixings are determined.

Investable IndexNo – Contact Vision Hill for custom investable indices.
Index Inclusion CriteriaManagers must contribute performance to the VisionTrack Database in order to be eligible for the Vision Hill Crypto Hedge Fund Indices.

Publication Methodology

Estimates~ T+30 days after each month end
Final Fixings~ T+60 days after each month end

Bias Mitigation (Self-Reporting, Survivorship, and Backfill Bias)

Vision Hill reserves the right to remove funds from its indices that do not report on a consistent and timely basis to mitigate self-reporting bias. Vision Hill rebalances the Vision Hill Crypto Hedge Fund Indices monthly on an equal-weighted basis. This continuous periodic rebalancing mitigates survivorship bias by including eligible new funds on each rebalancing date. As long as a fund maintains its eligibility for the respective index, it will remain as a constituent of that index. Vision Hill also refrains from including any historical data for a given new fund prior to the inclusion date of that fund. Performance data may be reported to the VisionTrack Database, but performance for index inclusion purposes only begins upon the index inclusion date to mitigate backfill bias.

Additional Notes

Prior to April 2020, the Vision Hill Crypto Hedge Fund Indices were referred to as the Vision Hill Active Crypto Indices and were rebalanced quarterly based on manager-provided performance. Individual index constituent data is not available prior to April 2020 due to manager confidentiality. Beginning in April 2020, all individual index constituents must have opted in to provide performance data to VisionTrack to become eligible for inclusion in the Vision Hill Crypto Hedge Fund Indices and corresponding performance rankings. All other standards of integrity apply to the previous index fixings before April 2020. For more details on historical methodology or other questions, please contact us.

Disclaimers

The Vision Hill Crypto Hedge Fund Indices are a family of crypto hedge fund indices owned and administered by Vision Hill Group Inc. The Vision Hill Crypto Hedge Fund Indices are designed to represent the overall performance of actively managed crypto and blockchain-focused hedge funds. Performance of an index is not illustrative of any particular investment. It is not possible to invest directly in an index. Historical performance is not indicative of future results. Performance information for the indices is provided for informational purposes only. The content provided herein should not be considered investment advice, and is not a recommendation of, or an offer to sell or solicitation of an offer to buy, any particular security, strategy, or investment product.