Key Takeaways
- • Paul Yablon, founder of digital-focused hedge fund Room40 Capital and former Moore Capital Management portfolio manager, is returning all external investor capital to reshape the firm around proprietary funds and a single institutional investor, according to an investor letter seen by Bloomberg.
- • Room40 managed approximately $262m in regulatory assets at the end of 2025, per a regulatory filing, and has delivered an annualised return of 14.4% since its May 2022 launch, Yablon told investors.
- • Room40 will broaden its mandate beyond digital assets into macro trading, and Yablon is returning to Moore Capital as a macro portfolio manager, according to a person familiar with the appointment.
- • Yablon cited growing security risks in crypto, pointing to last month's $6.3bn theft at Binance (Room40 had no exposure), and said attractive asymmetric crypto opportunities have become scarce.
- • The move reflects broader pressure on smaller hedge fund managers, with more than 3,100 hedge funds closed since the start of 2020, according to Hedge Fund Research.
Summary
Paul Yablon, founder of digital-focused hedge fund Room40 Capital and a former portfolio manager at Moore Capital Management, is returning all external investor capital as he restructures the business to manage proprietary funds alongside capital from a single institutional investor. According to an investor letter seen by Bloomberg, Yablon plans to broaden the firm's strategy beyond digital assets to encompass macro trading, citing an increasingly complex investment environment and evolving opportunities across asset classes. A person familiar with the appointment told Bloomberg that Yablon is also returning to Moore Capital as a macro portfolio manager.
In the letter, Yablon highlighted growing security risks across the cryptocurrency ecosystem, pointing to last month's $6.3bn theft at Binance as an example of the sector's challenges. Room40 had no exposure to the incident. He also said opportunities offering attractive asymmetric risk-reward profiles in crypto had become increasingly scarce. "AI is accelerating change and uncovering new vulnerabilities that extend far beyond crypto," Yablon wrote, adding that protecting capital now requires sustained investment in security, technology and operational expertise. He suggested that for smaller, standalone firms, the resources required to maintain these capabilities have become increasingly difficult to justify.
According to a regulatory filing, Room40 managed approximately $262m in regulatory assets at the end of 2025. Yablon told investors the fund has generated an annualised return of 14.4% since its launch in May 2022.
The restructuring comes against a difficult backdrop for smaller hedge fund managers, as institutional capital increasingly concentrates among larger established platforms with the resources to attract both assets and investment talent. Data from Hedge Fund Research show more than 3,100 hedge funds have closed since the beginning of 2020. Yablon argued that the changing landscape requires a more flexible operating structure, writing: "In my forty years on Wall Street, I have rarely seen such profound macroeconomic, technological and geopolitical uncertainty." He contended the current environment presents significant opportunities for managers able to invest across multiple asset classes while maintaining the infrastructure needed for increasingly sophisticated strategies.
In the letter, Yablon highlighted growing security risks across the cryptocurrency ecosystem, pointing to last month's $6.3bn theft at Binance as an example of the sector's challenges. Room40 had no exposure to the incident. He also said opportunities offering attractive asymmetric risk-reward profiles in crypto had become increasingly scarce. "AI is accelerating change and uncovering new vulnerabilities that extend far beyond crypto," Yablon wrote, adding that protecting capital now requires sustained investment in security, technology and operational expertise. He suggested that for smaller, standalone firms, the resources required to maintain these capabilities have become increasingly difficult to justify.
According to a regulatory filing, Room40 managed approximately $262m in regulatory assets at the end of 2025. Yablon told investors the fund has generated an annualised return of 14.4% since its launch in May 2022.
The restructuring comes against a difficult backdrop for smaller hedge fund managers, as institutional capital increasingly concentrates among larger established platforms with the resources to attract both assets and investment talent. Data from Hedge Fund Research show more than 3,100 hedge funds have closed since the beginning of 2020. Yablon argued that the changing landscape requires a more flexible operating structure, writing: "In my forty years on Wall Street, I have rarely seen such profound macroeconomic, technological and geopolitical uncertainty." He contended the current environment presents significant opportunities for managers able to invest across multiple asset classes while maintaining the infrastructure needed for increasingly sophisticated strategies.
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