DeFi risk and reward
Erker is open to DeFi (Liquidity Providing (LPing) or lending) staking or DeFi yields when the returns warrant the risks. “DeFi rewards were historically interesting but now yields have come down and US interest rates have gone up it is hard to justify the operational and counterparty risks for a return of, for example, 8% when US Treasuries yield 4%,” argues Erker. For instance, ETH now only pays about 3% in ETH. “We would only do staking if we also like the protocol as we do for Ethereum’s multi-bagger potential. Before 2022 we could get 30% yields on staking with some lesser-known protocols, but now it is hardly worth getting 3% when we expect to multiply our money,” says Erker.
“Looping”, which might also enhance returns, is avoided because the approach is more conservative.
Structured products, cash and put options
Various structured products can also be used to provide a better ratio of upside to downside at certain stages of the cycle when Erker is more cautious and expects a rangebound market. “Right now, in July 2025 we are in a trending market and are in less need of using structured products for downside protection,” he says.
At the same time the strategy is not going ‘all in’; it is not leveraged and is not even 100% invested. “We held 65% cash around FTX and now have about 35% just in case there is a pullback that we can buy into,” says Erker.
“We might get some puts instead of cash when the market becomes overheated and we expect a correction, but they entail some operational complexity with the administrator,” admits Erker.
The strategy stays net long because Erker is confident of the long-term growth story.
Macroeconomic context
The cash weight can also be influenced by economic analysis. Thanos Papasavvas of ABP Invest Limited provides top-down asset allocation and strategic asset allocation inputs. “These are becoming more important as crypto matures as an asset class. This sort of analysis could help to determine our cash weighting, though the process is very much discretionary rather than driven by an economic model,” explains Erker.
Custody solutions
Zenith has several custody solutions for different assets and protocols. “We use Copper to provide an institutionalised solution for some assets and view Copper primarily as a co-storage solution. In addition, we have co-storage with Bank Frick in Liechtenstein. Furthermore, we have an in-house custody solution with a multi-signature hardware wallet. We use Ledger Enterprise Solutions as a hardware wallet for some DeFi staking that is not supported by Copper or bank custody solutions. For instance, Copper does not cover every protocol and did not have staking for Threshold when we wanted it”.
Erker has reviewed the triparty repo structures but has not adopted them.
Regulation and distribution
Khepri Advisers, a UK fund solutions business spun out of MJ Hudson group in 2023, acts as the regulatory umbrella for Zenith’s multi-asset investment advisory business.
“However, the investment strategy is outside the scope of the UK FCA regulator. The Cayman fund is distributed to professional investors mainly through reverse solicitation, since it is not registered and is not an AIF,” explains Sven Kuhlbrodt, a non-executive director, business consultant and company secretary to Zenith, offering advice on marketing and operational issues.
It can however be more active marketing in Switzerland and Germany, where the fund is approved. “It was easier in Switzerland because we are registered for B2B marketing and had a local payment agent,” says Kuhlbrodt. “We are broadening out the client base beyond our current network. Later, we might look at raising assets in the US as the administration opens up the market,” he adds.
