Interval Funds

May 07. 19:05

Steven McClurg's Basquet LLC Registers the Basquet Global Credit Fund to Back New Cryptocurrency Offering

Basquet LLC registered the Basquet Global Credit Fund (the “Fund”) on 5/07/2021, which will focus on acquiring fixed-income securities across global markets to provide value backing for Basquet’s forthcoming digital token offering. This unconventional holding approach complements the Fund’s unorthodox trading option: peer-to-peer transfer of shares on the Algorand blockchain. This means, if the plan is greenlighted by the SEC, shares of the Fund could be transferred between individuals as a form of cryptocurrency.

According to the Fund’s most recent prospectus, Basquet LLC will serve as the Fund’s advisor. The firm was formed in December of 2020 by Steven McClurg, who will serve as the Fund’s portfolio manager. McClurg is also the founder of Basquet (BSQT), a planned interest-generating digital token whose value will be backed by a pool of currency-denominated bonds. The BSQT token is slated to launch in 2021, and it appears that the Basquet Global Credit Fund’s holdings will be used to collateralize the coin and provide its interest-generating capabilities. The token is advertised as a “stablecoin,” a class of cryptocurrency designed to buffer investors from the infamous price fluctuations of popular tokens like Bitcoin and Ether.

Steven McClurg's Basquet LLC Registers the Basquet Global Credit Fund to back new cryptocurrency offering


McClurg also founded Valkyrie Funds, which serves as the Fund’s sub-advisor. Valkyrie is an asset management firm focusing on cryptocurrencies, and it operates two trusts for Bitcoin and Polkadot digital tokens.

Those familiar with the process of selling interval fund shares will be surprised to learn that the Basquet Global Credit Fund will allow transfer of shares between individuals on the Algorand blockchain, effectively creating a secondary market for shares by converting them to a cryptocurrency. Any trader who has an account with both Algorand and Basquet can participate in this process, and peer-to-peer share transfers don’t have to be priced at net asset value as is typical for interval fund shares. Although the share price, and thus the coin price, will be backed by a pool of bonds, this secondary market capability will introduce supply and demand pressures into the security’s market value.

Steven McClurg's Basquet LLC Registers the Basquet Global Credit Fund to back new cryptocurrency offering

Though the Algorand platform provides a secure, decentralized ledger for these transactions, they will also be recorded by the Fund’s transfer agent. Algorand may impose transaction fees, and capital gains and losses realized in peer-to-peer transfers are taxable as they would be for any other security.

The Fund’s anticipated holdings are fairly standard for a fixed-income interval fund: primarily investment-grade securities from developed global markets, with at least a third of assets invested in U.S.-registered securities. The Fund can invest up to half of its net assets in any non-U.S. developed market, and no more than 15% in any sub-investment-grade developing market. The Fund defines “developed markets” as those listed on the FTSE World Government Bond Index: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Malaysia, Mexico, Netherlands, Norway, Poland, Singapore, Spain, Sweden, United Kingdom, and the United States. Notably, the Fund will not hold any digital securities or tokens.

The Fund’s legal team is Dechert LLP.