Best known for his musical performances and success as a poker player, Kane Kalas has traded his life in the continental United States for the more laidback Caribbean lifestyle of San Juan, Puerto Rico. The island boasts perennially warm weather, sandy beaches, and a charming culture.
As a territory of the United States, Puerto Rico has also positioned itself as a unique tax haven for high-net-worth individuals who relocate to the island from the continental USA. The Act 60 program grants these individual residents a net federal capital gains tax rate of 0% and a net corporate tax rate of 4% for businesses that relocate to the island to export services.
Following his illustrious career as a professional poker player, Kalas is now a full-time investment manager. By the time Kalas won the largest pot in televised poker history, a $2.18 million pot at the Triton Series of Poker in Montenegro in 2018, he had already transitioned to playing cards part-time with a majority of his time being spent analysing and trading stocks and cryptocurrency.
Professional Gambler To Professional Investor
Kalas found success at the poker tables at a very early age. By eighteen he had already developed a reputation as one of the elite online professionals and was a regular in the highest stakes game to ever run online - the $100,000 buyin Full Tilt Poker "Rail Heaven" game. By his mid-twenties he began to make a splash in the live poker scene and in 2014 he placed runner-up in the Borgata Poker Open WPT for over one-half of a million dollars.
The hyper-competitive worlds of high stakes poker and investment management have a lot in common. Both require composure under pressure, perseverance through volatility, and avoidance of overexposure - skillsets that Kalas has been honing since his teenage years. In today's information age, Kalas attributes his recent profitability in both domains to his core philosophy: "trust data."
In August 2020, he established his hedge funds, Crystal Oak Partners and Crystal Oak Digital Assets and now manages both funds utilizing quant and arbitrage strategies.
Moving From The Felt To The Tropics
Kalas is an early adopter of Bitcoin. One of his funds, Crystal Oak Digital Assets, based in San Juan, executes arbitrage strategies in cryptocurrency markets. Puerto Rico has attracted numerous investors, entrepreneurs, money managers, and influencers in the crypto space.
"Many people within the crypto community have relocated to Puerto Rico for the same reasons," Kalas says, "who wouldn't want to live in tropical paradise among other likeminded people. Puerto Rico is quickly rivalling places like Silicon Valley and Vancouver as a hub for cryptocurrency thought leaders. The tax incentives are an added benefit."
But business leaders who have relocated to Puerto Rico are not limited to those involved in digital assets.
"The Act 60 program is attractive for financial services firms, consulting firms, research and development firms - basically any industry that exports services." Kalas states. "Not only crypto guys have moved here. In fact, John Paulson moved here years ago. I think he's a Bitcoin sceptic."
A Guiding Light and a Critic of Traditional Models
For those who avidly follow the world of digital assets, Kalas' predictions and opinions surrounding cryptocurrencies are always of interest. For years now, investors have closely monitored his sentiments and have been inspired by his success in the field. It is Kalas' tempered and analytical approach to cryptocurrency investing that has led to his notoriety in the space.
As a quant investor, Kalas spends his time looking for relationships between a myriad of possible variables and price. In his research on traditional equities markets, Kalas has found that both fundamental valuation criteria and textbook technical analysis models are flawed.
"In my opinion, the days of hard-nosed investment are long gone." Kalas says. "Computer models are the new way forward. Increasingly, they're outperforming humans, and so long as they're given enough data, they can reveal relationships and correlations that would never otherwise have been imagined by human intuition."
According to Kalas, if you're making investment decisions based on Price-to-Earnings ratios, you're doing it wrong. If your decisions are based on the degree of expected rainfall in the Southern United States, you may or may not have found something. If you are gathering raw data about user acquisition and the inflow of user information among big tech and endeavour to ascribe monetary values to these metrics, then you are on the right track.
Kalas sums up this advice, "It is only worth analysing variables that are both relevant to performance and that the market at large does not fully appreciate."
Establishing Crystal Oak
After years of honing his craft managing the wealth he earned as a poker player, Kalas launched Crystal Oak Capital in August 2020, which offers two investment products - Crystal Oak Partners, an equities fund, and Crystal Oak Digital Assets, a cryptocurrency fund.
Crystal Oak Partners uses quantitative data to trade foreign and US securities, employing a long-short trading approach for medium-to-long term investments. Kalas pinpoints well-run publicly traded companies as targets for investment to benefit from their profitability and growth. The fund concentrates on mega, large, and mid-cap stocks, adopting the use of quantitative models to predict volatility changes, price movements, and changes in earnings, sales and revenue.
Meanwhile, Crystal Oak Partners' short strategy utilizes multi-day or intra-day short positions in mid and small-cap companies that are over-hyped. Kalas plays on market euphoria inspired by bullish media that pushes these companies' shares to unsubstantiated prices, selling short securities which have climbed temporarily in value due to this type of exposure.
Crystal Oak Digital Assets identifies and exploits market inefficiencies and arbitrage opportunities in digital assets to generate alpha. The cryptocurrency market is still new and is constantly evolving. As such, arbitrage opportunities that seldom exist in traditional markets are rampant. Crystal Oak Digital Assets engages in futures arbitrage, interexchange arbitrage, and the arbitrage of cryptocurrency-backed securities. The fund also monitors and capitalizes on oversized lending rates to generate fixed income. Crystal Oak Digital Assets further utilizes industry news and market sentiment to project and capitalize on price movements in digital assets.
