AYU Member Spotlight: Ed Wethered of Calligraphy Digital
Ed, CIO of Calligraphy Digital,
combines a diverse set of systematic trading strategies to deliver exceptional returns from
the digital assets markets with limited drawdown and controlled volatility.
Ed is the CIO of the Calligraphy Digital Multi Strategy Fund. He started his career at Merrill Lynch in the hedge fund group. At 26 yrs old, he co founded an award winning systematic hedge fund as a joint venture with Merrill Lynch. Ed is now the CIO of Calligraphy Digital, which builds bespoke systematic trading strategies in digital assets. Their first fund combines a diverse set of systematic trading strategies to deliver exceptional returns from the digital assets markets with limited drawdown and controlled volatility.
Hi Ed what are you working on today?
I’ve been working on the emergence of the bitcoin L2 ecosystem and developing a strategy that will dynamically allocate to tokens that will benefit from the necessary increase in transaction fees that are required to offset the slashed mining revenues post the bitcoin halving. My team are also working on developing our dynamic cross strategy allocation module, which is giving us even more control over the underlying risk factors in the portfolio.
We’re also looking at the persistence of the funding rate in perpetuals and seeing if we can use some of our fundamental indicators to dynamically harvest that opportunity set.
How did you get to where you are now?
I started in hedge funds very young: at 16 years old I used to spend my summer holidays filing hedge fund documents in the basement of one of the UK’s largest funds of funds. Over the next 5 summers I learnt what hedge funds were all about, through the exposure I got to a diverse range of strategies. It really became clear to me there that – over the long term – computers are much better at managing money than people; on the whole, most of the money was being made by hedge funds from style factors, or what came to be known as alternative betas. These are things like momentum, trend, carry, value vs growth and so on.
After university I joined Merrill Lynch and worked in the hedge fund group. We were looking after $14bn of financial advisor capital, building strategies and assessing those built by others. We did a lot of work on portfolio construction, particularly on how to build risk management systems that were able to restrict portfolio volatility.
In July 2008 I was a bit worried about the Merrill balance sheet, so I resigned and went to Zambia to work in a venture capital fund that was starting and operating businesses across sub Saharan Africa. This was my real life MBA. It took me away from the online markets and taught me about real businesses with real products. I learnt so much about building business models – both the practicalities of excel modelling, but also the necessity and concurrent risks in making assumptions.
Whilst I was there, the head of the hedge fund group from Merrill Europe asked me to return to London and co found our own hedge fund as a joint venture with Merrill Lynch. We built portfolios of systematic trading strategies, raised $200m across 2 hedge funds and won an award from the Hedge Fund Journal. We backed that business into Credit Suisse.
After that I did a masters in organisational behaviour, set up a charity and turned my hand to investing in circular economy start ups, before getting into digital assets. I spent a long time researching the technology and understanding the markets, before being approached by a family office to start Calligraphy Digital.
What attracted you to this business?
I’ve always liked challenging myself, and there’s no better way to do that than starting a business that is both intellectually challenging and that requires strategic clarity of thought.
The family office that is backing me also really believed in my vision of how to build a successful business in the space, and were supportive of me when I was sceptical of “opportunities” that turned out to be worthless or even worse, frauds.
What has been the most pivotal moment of your career so far?
I think the 2008 crisis was a big moment for me. I made a huge call to quit Merrill Lynch, which ultimately turned out to be the right one. It taught me to believe in my own assessment of situations, and to always question the status quo. If something doesn’t quite feel right, it normally isn’t!
What aspect of the industry excites you the most?
Digital Assets is a fast moving and dynamic sector. It combines finance, sociology, technology, economics and business, which are all areas that I’m fascinated by. I love the idea of challenging the status quo to try to achieve a fairer, more open, more efficient and more productive society, and the idea of giving people greater ownership of their data for greater good is really exciting. Data is taking over our world – it’s the most valuable resource that we have - and yet there are so many instances where data is improperly collected, siloed, not well managed or lacks provenance and therefore trust. All of these things can and should be solved with technology. I can’t predict the future, but I think there’s a chance that blockchain will help – at least in part – in solving those problems. I think that’s super exciting.
What would you change?
I really don’t get on board with the hype and the ‘bro culture’. I also don’t think that big business bashing is helpful. Too many people in digital assets are trying to make a quick buck by selling an appealing narrative, that usually is more compelling than the prospects of the underlying business model.
What do you invest in personally?
My fund!
Where do you celebrate?
Ideally in a Swiss alpine hut after a decent day of running trails!
What is at the top of your bucket list right now?
I am trying to visit every swiss mountain hut. I’m about a quarter of the way there.
What does success mean to you?
I actually created a triangle of success for myself, which is based around earning enough money to do what you want to do, having autonomy over your time and being interested in the work that you do.
What’s the best piece of advice you’ve ever been given?
You can’t control returns, but you can control risk.