When it comes to finance, it’s easy for the general public to be hypnotized by the overflow of Wall Street jargon. “Alphas”, “betas”, and “hedge funds” were the only thing that the 20 year old founder of Banz Capital, John Iadeluca, thought about growing up, though. “Hedge funds were like the elite traders. They were exclusive, and I knew since I was young I was meant to be a part of that,” says Iadeluca, the founder of the hedge fund that boasts quants, partners, and team member alumni from the likes of Citadel LLC and Goldman Sachs. At 20 years old, the New Jersey native is one of the youngest fund managers in finance. “People think Wall Street is old guys wearing suits and making phone calls all day, but it’s not. Now, it’s just a lot of twenty-something year olds writing code and drinking a lot of Red Bull,” he claims.
Iadeluca’s fund, Banz Capital, uses quantitative (quant) strategies in the public digital asset markets and ‘dark pools’ (Hidden exchanges like the Republic Protocol). He’s a part of the group of financial programmers called “quants”, traders that use complex math and programs to execute trades at sometimes inhuman speeds. For example, high-frequency trading, a main strategy for Banz Capital, involves sending thousands if not millions of trades into the market to try to get an “edge”. Behind many of these funds are the idea that by using these strategies they can maintain consistency regardless of a bull or bear market. Behind many of these computerized funds like Iadeluca’s, also lies controversy; sometimes even an “unfair” labeling, because of their winner-takes-all/survival of the fittest mentality. “The smartest strategies win. You adapt to survive, Wall Street has always been cutthroat, and this is no different,” he explains.
Formed in New York and now recently headquartered on Wall Street, the Banz Capital fund structures through a standard two % management fee and takes between 20 and 30% of profit generated for its investors. The fund currently offers management strictly for accredited level investors. Quantitative firms have targeted and composed much of the daily equities and foreign exchange markets, Banz Capital is making itself comfortable exclusively in the digital asset markets. The primary reasoning is because of its more internet-like aura, believed to hold higher profit-margins, 24/7 global markets, and a more interactive environment for these so-called quants.
Even though Iadeluca is only 20, the fund manager believes his age is one of his strongest qualities. “People my age are the first of this generation to interact with these markets. We grew up with computers and phones, we know how powerful they are, so we look at the markets in a certain way that traditional investors aren’t able to. Especially when it comes to new, computerized methods that are generating higher returns.”
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Rather than equities markets whereby representations of assets are traded, digital assets are sent, received, and confirmed through their true value within seconds. Things like luxury cars, artifacts, or shares in art pieces can be “digitized”, a process of linking Blockchain to their intrinsic value. Instead of volatile prices like most cryptocurrencies, some of these new assets abide by their absolute value, just in a more reliable environment. Just recently, a Manhattan apartment was “digitized” and sold for over $30 million on the blockchain. Banz Capital is betting that this side of technology, in accordance with quantitative trading, will prosper above all others.
The Banz Capital founder’s entrance to new technology like Blockchain had even younger beginnings, though. By 13, he had taught himself how to program and trade virtual stocks, and was quant trading soon after. At 17, while employed as a full-time developer for a local Jersey company LLH Data, Iadeluca launched the website “BittyMe” to earn Bitcoin by watching free advertisements. In three days, the site was confidently holding 70,000 active users from around the world. He claims he was running the site out of his parent’s living room. He jokes, “My mom was getting mad because there were four computers lined up in the middle of when people walked in the house.”
The young developer’s plan for a private fund wasn’t recently established, either; according to Iadeluca, he’s been perfecting Banz Capital since high school. “There were over 10 people asking me to trade large sums of money. I taught myself hedge fund structures, but I didn’t have capital for fund expenses. I was 17, and no bank would give me a loan. I made a plan, though, and I kept working,” explains Iadeluca. Despite a possible dead end, the setback proved as a blessing in disguise, as he says “No high school classes taught me about hedge funds or corporate structure, so I taught myself in the meantime.” 4 years later, after working full-time as a developer and attending school, he signed the paperwork with a New York law-firm to form “Banz Capital”.
Amongst optimism, current markets are in fact falling. As The Barclay’s performance index for 2018 showed hedge funds on average lost a noteworthy amount of money. Digital assets, things like Bitcoin and Ethereum, lost more than 85% of their market capitalization in 2018. Capital investment for “ICOs” (Initial Coin Offerings) also continued exponentially spiraling downwards amongst impending regulation. Quant and unbiased strategies including merger-income arbitrage funds have continually outperformed the market. Iadeluca seems unphased about declining markets, explaining quant funds shine while other markets faulter; “Downturning markets are healthy, and they enable opportunity. If you make consistent returns when the market loses, you stand out. Hedge funds are intended to stand out. The opportunities you get when you combine digital assets with quant strategies is its own world, its own market. You don’t need price to go up in order to make profit, you need liquidity, which is very much available.”
In a sign of the future for Banz Capital, Iadeluca details that the firm has begun developing internal blockchains and cross-fund chains, which can facilitate its strategies’ success. In its search for alpha, Banz Capital believes it has found a diamond in the rough through its firm. “The fund’s ideologies really encompass a new age market,” continues Iadeluca, “If I didn’t feel the upside potential for Banz Capital was purely unlimited, I wouldn’t be as passionate about it as I am. I could be well off on my own without Banz. With this, I want to build something bigger, something that changes finance indefinitely,” - only markets, development of technology, and time will tell if that happens.