Q&A With Chris Rhine
As Head of Liquid Active Strategies at Galaxy, Chris Rhine oversees the firm’s liquid active crypto and emerging technology strategies, including the FTX liquidation mandate and the State Street sub-advised active ETFs (HECO, DECO, and TEKX). With over 20 years of investment experience at firms like Cohen & Steers and BlackRock, Chris brings a deep understanding of both traditional and digital markets.
In this Q&A, he shares insights on Galaxy’s Absolute Return Fund, its risk-managed approach, and the opportunities emerging in the rapidly evolving crypto space.
Can you share some insights into your role as Head of Liquid Active Strategies at Galaxy? What does a typical day look like for you?
Crypto markets never sleep, so my day always involves frequent market check-ins. First thing in the morning, I check both crypto and traditional finance markets to see where things are trading and what’s driving them. When I get to the office, we kick things off with a team discussion, identifying any actionable opportunities. If we choose to make a trade, I pass the instructions to my traders, who execute it with our partners.
The rest of the day is a mix of meetings -– with team members, sales, or other senior individuals in the firm. I also like to walk the floor to hear people’s views. With over 500 employees at Galaxy, most of whom are deeply plugged into crypto markets, there’s always a fresh perspective to discuss. I also spend time talking to current and potential investors about Galaxy’s funds, market outlook, and key themes we’re focused on.
Even at home, I’m still connected to markets. I’ve set up customized volatility alerts across crypto and equity futures to alert me on large moves. These alerts override any “do not disturb settings” on my Apple Watch, so if something big happens overnight, I’ll be able to analyze the situation. While overnight trades were more common during the uniquely high-volatility periods of 2022 and early 2023, things have calmed down a bit, which has been great for my sleep schedule.
Galaxy just launched its Absolute Return Fund. Can you tell us more about the fund, its objectives, and how it aligns with Galaxy’s broader strategy?
The idea behind Galaxy’s new Absolute Return fund was to create a risk-managed approach focused on idiosyncratic market opportunities rather than full market beta.
Properly running a true crypto hedge fund in the U.S. is particularly difficult as a registered investment advisor (RIA) due to the SEC’s qualified custodian rules that make shorting crypto tokens challenging. These rules require client assets to remain with a qualified custodian 100% of the time, and shorting temporarily removes crypto tokens, even if just for a moment. As a result, many U.S.-based crypto funds avoid shorting assets, leading to persistently high levels of volatility in their portfolios.
To address these challenges, our Absolute Return Fund exclusively trades securities on traditional regulated exchanges, using custodians known and trusted by traditional fund investors. We focus on equities, fixed income, and derivatives, with an emphasis on the digital asset and adjacent markets. The volatility of crypto markets often spills over into these assets, creating mispricing opportunities on both the upside and downside.
We’ve designed the Absolute Return Fund to target a volatility profile of about 15% per year. While we might take small market tilts, our primary focus remains on idiosyncratic opportunities in mispriced assets.
How does Galaxy's approach to active management differentiate it from other firms in the industry?
When it comes to active management, different people have different approaches. Some funds have low turnover and take very long views, but in crypto, that approach often leaves significant opportunities to drive alpha on the table. Crypto markets are known for exhibiting periods of strong momentum and volatility – both on the upside and downside – and positioning can get crowded fast.
Our approach is to take advantage of these shifts, actively managing portfolio risk and harvesting profits when they’re available. We are constantly looking at new and existing investment ideas that have the best risk-adjusted return profile. I view every investment as a competition for capital in the portfolio and we will continually work in and out of positions to optimize our alpha capture and minimize our risk budget.
Risk management is something many crypto funds overlook, but it’s a top priority for us. Our goal isn’t to simply generate the highest returns but to deliver the best returns relative to the risks we’re taking. For me, it’s all about delivering a superior Sharpe ratio.
Who are the key members of your team supporting you in executing Galaxy's active strategies, and what unique expertise do they bring to the table?
One of the best parts of working at Galaxy is the breadth of resources and talent we have at our disposal. Our policy team is on the ground in D.C. and keeps us informed of near and medium-term regulatory developments. Our independent research team consistently publishes top-tier analyses on crypto markets, protocols, and opportunities and risks in the broader market.
We also lean on other teams, like our data center and mining experts, who have been instrumental in helping us understand the high-performance computing (HPC) opportunities for bitcoin miners and how to evaluate them from an opportunity and risk perspective. Additionally, we stay in close contact with our Blockchain Infrastructure and Venture teams, all of which provide useful insights into their areas of focus. I also have my own dedicated investment team performing research and analysis across our investible universe.
Having previously worked at two great asset management firms, what’s different about Galaxy is that we don’t just rely on financial reports and management calls. Being actively involved in many verticals of the crypto space gives us a significant edge in identifying opportunities and staying ahead of the curve.
Risk management is a critical aspect of active strategies. How does Galaxy balance the pursuit of opportunity with mitigating potential risks, particularly with the Absolute Return Fund?
When you’re dealing with a 50-vol asset like bitcoin or nearly 100-vol assets like crypto equities, risk management is crucial. For the Absolute Return Fund, we use a multi-asset approach that allows us to find alpha opportunities while managing this volatility. Our net exposure rarely exceeds 35%, giving us room to efficiently hedge the portfolio while taking advantage of opportunities.
We don’t aim to be a market-neutral fund – we do take directional tilts when we have strong views on the market. But these tilts are measured to ensure that the portfolio’s total volatility doesn’t largely exceed our annual target of 15%. This disciplined approach has resonated with institutional investors who want exposure to crypto opportunities without taking on full market risk.
Looking ahead, what trends or developments in the market are you most excited about, and how is Galaxy positioning itself to capitalize on them?
There’s a lot to be excited about in 2025. Policy changes should help more companies embrace crypto and utilize the technology to build cheaper and faster money transfer and payment systems. Larger financial institutions might soon be able to hold crypto on their balance sheets, and banks will not be penalized by the restrictive SAB 121 regulation, which is likely to be repealed.
The HPC opportunities for bitcoin mining firms are another area of interest. I expect to see REIT and infrastructure investors become more active in the space as the taboo of investing in these companies dissipates with changes in regulatory posture. We also expect a strong IPO market for crypto and crypto-related companies, especially as we get into Q2 of this year, which will expand our universe of investable assets.
We’re also seeing a resurgence in institutional interest in crypto products. After years on the sidelines, many are finally sharpening their pencils and looking for ways to invest.
Galaxy Asset Management is well-positioned to capitalize on these trends through our comprehensive platform, which spans passive and active liquid strategies as well as venture investments. With a diverse range of products tailored to various risk appetites and a proven track record in the crypto space, we are ready to seize the expanding opportunities in these dynamic emerging markets.