What is your view on the impact that DLT and Blockchain is having in reshaping asset and wealth management? What is the current state of the space and how do you foresee it moving forward?
Status & challenges
The crypto asset products available to wealth managers have seen an important development over the past 12 months. Investors can now get exposure through a plethora of comfortable, traditional, venues, without having to deal with the technicalities associated with acquiring exposures over the crypto markets directly.
Products include in particular exchange traded products, certificates, notes, trust or funds as well as officially traded futures. Bankable products with an ISIN number have been a door opener for many larger investors who like and most of the time need to operate within the traditional regulated financial sector. The expanding bridge between crypto finance and traditional finance has also gone hand in hand with a multiplication of trading strategies offered by professional cryptocurrencies managers. Global estimates range from 400 to 800 funds that invest in Digital Assets. Strategies include long-short, market-neutral, high-yield, thematic portfolios, and discretionary trading.
The current challenges include the adoption rate by banks and brokers, which still adopt a conservative suitability risk stance, and, more for the longer term, the development of user-f riendly direct access to cryptocurrencies listed on regulated venues. crypto-currencies trading platforms are still to date unregulated.
Opportunity
The chief reasons were and remain portfolio diversification and enhanced risk-adjusted returns. The crypto assets have developed to a market valuation and popularity that are simply too big to ignore. In parallel, the adoption has been accompanied and to a great extent supported by constructive
stances taken by the regulators as a majority worldwide.
The expansion of the crypto assets class has also been in terms of the number of assets (over 9,000 crypto assets exist by now) and ecosystems (Decentralized Finance, Non-fungible Tokens, Staking Economy). crypto assets appear to be well-performing and low correlated to other asset classes. Bitcoin is in 2021 one of the top-performing assets and it has shown over its lifetime a generally consistently low correlation to other asset classes. Its volatility has lowered too over time to the point that it is less volatile than some fiat currencies and is seen as a valid inflation hedge. Crypto assets and the ecosystem they carry are increasingly seen as disrupting mature industries such as the financial industry. The major cryptocurrencies have already found their way into the corporate treasuries.
Trends
Blockchain and DLT is a technology. The application of this technology to finance allows to realize the economy of costs and execution time (for instance in the payments), create new financing instruments and processes (for instance ICOs and STOs), introduce additional liquidity and investment vehicles (for instance tokenization of assets), new financial ecosystems and markets (for instance Decentralized Finance) and much more. Against this backdrop and clear empirical evidence of market growth, there is little doubt that crypto assets will establish themselves as a new asset class. This will transform the financial landscape in a deep way, from payments to lending, stock trading, trade finance, and back-office processes.
What solutions does your company offer that asset and wealth management firms should consider?
FiCAS offers investors diversification in the crypto-asset class through a unique investment strategy and an institutional-grade company. FiCAS trades Bitcoin, top altcoins, and CHF, EUR, and USD in a discretionary way, with no leverage, based on technical and fundamental analyses, and house view. The trading strategy was developed over 7 years, audited over 4 years, and has yielded exceptional returns. FiCAS manages the assets collected through the sale of the product “15 FiCAS Active Crypto ETP” (ISIN CH0548689600). The product is listed on SIX Swiss Exchange, Börse Stuttgart and Vienna Stock Exchange, custodied at Swiss banks, easily accessible through banks/brokers, and available in the EU and Switzerland to all investors.
In contrast to the cryptocurrency-based ETP issued so far, which tracks passively a crypto underlying, the 15 FiCAS Active Crypto ETP manages up to 15 top cryptocurrencies in a discretionary way. The first business benefit comes therefore in terms of active 24/7 management of the investment akin to a traditional mandate. The second business benefit is the accessibility of the investment vehicle. It is listed on SIX Swiss Exchange, Börse Stuttgart and Vienna Stock Exchange and is easily tradable through banks and brokers by retail, professional and institutional investors in Switzerland, Liechtenstein, and the European Union. A key benefit is the high liquidity of the vehicle, thanks to the possibility to create and redeem the securities at any time and in any quantity for the given Net Asset Value. Lastly, the product stands out by a fully managed issuer risk: The product’s ecosystem includes a collateral agent independent from the issuer that will sell the securities and reimburse the investors in case of default of the issuer.
Figure 11: FiCAS – Providing actively management crypto services
FiCAS AG and its fully owned issuer Bitcoin Capital provide whitelabel services (AMC, actively-managed ETPs) to third parties (B2B) and also issue additional innovative crypto-based ETPs. Regarding whitelabel offering, asset managers that have a crypto trading strategy but miss an ideal vehicle to bridge to traditional investors are welcome to contact Bitcoin Capital and cutomize together an exchange traded product. Asset managers that face demands from investors for actively managed crypto investments are welcome to contact FiCAS and implement a mandate-based asset management solution.
This article is from The Wealth Mosaic's WealthTech Views Report: DLT & Blockchain 2022. Access the full report here
