December 2022 – Teks Alpha NAV Systema Fund

Market Overview

2022 seemed to be the year in which everything fell apart so to speak and December was no exception. Indeed it was another difficult month for both traditional and digital assets. However, in our view a lot of rotten apples were washed out by the market. Hence, 2022 may act as a wake-up call for the digital asset entire industry in the sense of increasing transparency, security, and regulation.

Despite some relief on the inflation front, global markets posted another lackluster month to close one of their worst years on record. As central banks battled with persistently high inflation, global stocks posted the worst year since the 2008 financial crisis and global bonds had by far their worst year since data availability for the Bloomberg Global Aggregate Index in 1990.

Bitcoin and the broader crypto market traded sideways over the month of December with low trading volumes recorded. 2022 marked the second worst year for Bitcoin with a drop of roughly 65%. The overall cryptocurrency market is also down around. 65%, thereby shedding around USD 1.46 trillion in market cap.

As other examples of a very difficult year, Coinbase which went public in 2021, lost 86.3% of its share value in 2022. Microstrategy, the world largest holder of BTC, went down almost 71% in 2022, and finally, Silvergate (US Bank) went down 89%.

Looking back, 2022 was marked by the spectacular collapses of the Terra USD stablecoin and several Centralized-Finance (CeFi) platforms such as Celsius, Voyager, BlockFi and of FTX. Although all these examples had nothing to do with the technology of cryptocurrencies or blockchain, confidence in the entire asset class has been shaken.

Moving forward and despite the overwhelming challenges that cryptocurrencies will face, we believe that crypto will recover more strongly and the post winter period will

come with huge opportunities for the ones who were able to survive.

Again, Teks Capital had NO exposure to FTX, Blockfi, Genesis or Gemini earning products.

During December, BTC ended up performing -3.7% and ETH -7.6%. The S&P ended -6.1% for the month and the Nasdaq performed -8.5%. US Bonds (safe haven) were down -1.48% while Gold price ended the month +3.4%.

On a YTD basis, 2022 was the worst year since 2008 for equities. Returns were also dismal across all asset classes. S&P -20%, Nasdaq -33%, US Bonds -21%, and Gold almost flat.

BTC is down -64% and other digital assets have also performed in the -70% area. This compares to our YTD return of -9%.

Performance

During December, the Fund returned -0.78%.

Again what affected us most during this month was the cash synthetic we structured to minimize crypto’s volatility. As you know, the FTX collapse sent futures to a brutal backwardation.

Based on the above, and as expressed in our previous newsletter, we started investing a portion of our assets in traditional markets, using our proprietary models which have been developed over the past 2 years and deployed in the digital asset space. This is based on the much higher liquidity and granularity such markets offer. The results are indeed very impressive. We had a +10% return in December, compared to a -6.1% of the SPY.

We are still expecting volatile months ahead but we are cautiously optimistic.

The new series of structured option products that optimize risk/rewards (i.e. our prop models) have obtained impressive results. As a result, we will continue to implement them and are therefore very excited about 2023.

Teks Alpha Performance (%)

Teks Alpha Performance vs Benchmarks since inception (March 2021)