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German Financial Group to Launch Crypto Index Funds for Institutional and Retail Investors

Iconiq Funds, the asset management arm of Germany-based Iconiq Holding — the team behind the ICO and token sale accelerator program Iconiq Lab — is launching a series of digital asset index funds beginning in Q4 2018, the company announced on Aug. 17, 2018. Investment into crypto assets will become available through traditional and regulated financial vehicles, such as exchange-traded funds (ETFs) and exchange-traded notes (ETNs).

The first digital asset index fund is planned to be launched under Maltese jurisdiction as a Professional Investor Fund (PIF). It is currently under review by Malta Financial Services Authority (MFSA).

The company claims the “diversified exposure to the digital assets market” as a key selling point for this new series of instruments. An investment fund essentially hides the intricacies of crypto assets from its participant, offering participation in a selected group of tokens. An investor expects that, even if some tokens of the group won’t perform well, the growth of others will compensate for it.

Iconiq Funds says the company will offer its financial products under the supervision of a governmental watchdog — such as MFSA for Malta. The team explains that, for many conservative investors, the lack of regulatory oversight was a key reason to avoid exposure to crypto assets.  

Maximilian Lautenschläger, Iconiq Holding’s managing partner, believes that such investment vehicles could help bring new capital to the crypto industry from the traditional financial markets. “Iconiq’s aim is to make ICOs and crypto investments accessible to institutional investors, family offices and retail investors. Only through such regulated vehicles can we open the doors for the trillions of capital from institutional markets to enter crypto.” Lautenschläger said, according to the announcement.

Later, Iconiq Funds also plans to offer other financial products suited for traditional investors’ demands, such as crypto index exchange-traded funds (ETFs) and notes (ETNs) in 2019.

Digital asset management token

The company says that Iconiq Funds is not merely a traditional asset management firm that started trading in crypto. It is, rather, a part of a larger, community-driven ecosystem that Iconiq Holding has built around its own token, ICNQ — initially released by Iconiq Lab. The ICNQ token functions as a “decentralized VC club membership instrument.” According to Iconiq Funds, its holders receive access to presales of companies graduating Iconiq Lab’s token sale accelerator program. It can also be used as a voucher instrument for payments within the asset management ecosystem created by Iconiq.

“We have successfully positioned the ICNQ token as the token for digital asset management,” said Iconiq Holdings CEO Patrick Lowry. “ICNQ tokens can now be redeemed in our ecosystem for products and services provided by Iconiq Holding companies, including by our digital asset index funds to pay asset management fees to the fund manager, Iconiq Funds. We are excited to add this new value-driver to the ICNQ economy, with many more to come for the benefit of our community.”

According to the internal memo Cointelegraph had access to, Iconiq Holding will be selling up to 10 million remaining ICNQ tokens, with a public token sale taking place on the Gibraltar Blockchain Exchange Grid in October 2018. The ICNQ token will then be traded on Gibraltar Blockchain Exchange after the sale, with more exchanges to come.

Iconiq says it plans to capitalize on opening the crypto marketplace to a completely different, and much more powerful class of investors, which may bring “a tectonic change” to the crypto market. Also, it hopes the ICNQ token itself will have the potential to become a kind of derivative instrument that would reflect the influx of the virtually unlimited capital from the outside world of traditional finance into the much smaller crypto ecosystem.

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Morgan Creek Digital, Bitwise Partner on New Digital Asset Index Fund

Morgan Creek Digital and crypto index provider Bitwise are teaming up to launch a new index fund aimed at institutional investors looking to enter the digital asset market.

The Digital Asset Index Fund offers the top 10 largest digital assets weighted by market capitalization to accredited and other major investors, with Bitwise managing the fund itself. According to its official website, the index fund is geared heavily toward bitcoin, while offering exposure to other major cryptos like ether, bitcoin cash and EOS, among others.

Anthony Pompliano, a cryptocurrency bull and a partner at Morgan Creek Digital, said in a statement that the 2018 bear market provides an opportunity for investors to build out their exposure to the market.

He separately told CoinDesk in an email:

“We have been approached by many institutional investors who want to gain exposure to digital assets. By partnering with Bitwise, the leading crypto index provider, we are able to bring an institutional-grade solution to these clients. The crypto industry continues to mature and we see this as another milestone along the way.”

Bitwise CEO Hunter Horsley told CoinDesk that the fund is geared toward simplified access.

“[Morgan Creek chief investment officer] Mark Yusko and Morgan Creek have spent more than a decade working with institutional clients and earning their trust,” he explained. “Having a firm like them partnering with investors who want to explore and get exposure to the crypto space is a huge step in making it more accessible to institutions.”

Assets stored by the fund will be kept in cold storage to improve their overall security. These assets will be governed by a set of eligibility requirements which include custody qualifications, trade concentration limits and pre-mine restrictions.

To further the fund’s security, Morgan Creek and Bitwise intend to conduct annual audits. Yusko, Pompliano and Bitwise global head of research Matt Hougan will form a committee to oversee the fund as well.

Bitwise already offers accredited investors access to cryptocurrencies through its private index funds, as previously reported by CoinDesk. The firm is also seeking to launch an exchange-traded fund based upon the top 10 cryptocurrencies by market cap.

Bitcoin image via Shutterstock

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Vanguard Taps Symbiont's Private Blockchain for Index Fund Data

Vanguard, the mutual fund giant, will begin using smart contract technology developed by blockchain startup Symbiont in some of its actual business processes starting early next year.

For the last few months, the companies have been testing the technology to simplify the way Vanguard takes in data from the Center for Research in Security Prices (CRSP) at the University of Chicago’s Booth School of Business. This information is used to determine the composition of certain index funds managed by Vanguard, and includes things like company names, share counts, index weighting and corporate actions such as mergers or stock splits.

The three partners found the private blockchain speeds up delivery of the data from CRSP to Vanguard, removes the need for manual intervention and lowers risk. The project will go into full production in early 2018, the companies said Tuesday.

Warren Pennington, a principal in Vanguard’s Investment Management Group said in a release:

“Using this platform, investment managers will be able to instantly distribute, receive, and process index data, resulting in better benchmark tracking and significant cost savings that potentially results in better returns for our clients.”

The partnership will involve 17 index funds totaling $1.15 trillion in assets, including Vanguard’s largest, the $650 billion Total Stock Market Index fund. To be sure, that’s just a portion of Vanguard’s business; it manages 186 index products, with $3.56 trillion in assets, as part of a total 376 funds containing $4.8 trillion.

Still, it’s a noticeable advance for enterprise applications of blockchain technology at a time when most of the industry spotlight has been on the boom in cryptocurrencies and token sales.

The news follows last week’s decision by the Australian Securities Exchange to replace its clearing and settlement system with a distributed ledger alternative from startup Digital Asset following years of deliberations.

Vanguard image via Shutterstock

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Reality Shares, Nasdaq Partner to Launch Blockchain Economy Index

Investment marketplace Reality Shares has teamed up with Nasdaq to launch an index tracking companies in the nascent blockchain industry.

The smart-beta index – called the Reality Shares Nasdaq Blockchain Economy Index – is compiled by using internal and external research, as well as a proprietary “Blockchain Score” ranking system, a press release states.

Reality Shares is also planning an exchange-traded fund (ETF) that will track the index and has already filed the proposal with the U.S. Securities and Exchange Commission.

Fredrik Voss, vice president of blockchain innovation at Nasdaq, said that the collaboration represents a “tangible way” to track the growth of blockchain sector. The blockchain index may include equity securities of both operating and non-operating companies, the ETF filing states.

Eric Ervin, CEO of Reality Shares said:

“As these new applications are deployed, we believe these companies will most likely become disrupters in their industries, with potential to profit at the expense of laggard companies that do not deploy blockchain applications.”

Reality Shares’ ETF announcement was reported by CoinDesk earlier this month, alongside news that Amplify Trust ETF is also filing for permission to invest and trade in blockchain startups.

Chart image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.

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Money on Mougayar? Business Blockchain Author Launches Cryptocurrency Fund

Author and investor William Mougayar has launched a blockchain-based cryptocurrency index fund.

Announced yesterday, Mougayar is one of 12 managers to open up a fund on iconomi, a blockchain-based digital asset management platform. According to Mougayar, however, his fund will distinguish itself by allowing investors to benefit from something he is uniquely able to provide – his expertise.

“I’m able to balance and rebalance the basket in a favorable way. And that insulates the average user from some of the blind spots that they may be facing,” he said.

On this point, Mougayar offers no shortage of credentials, having authored a book “The Business Blockchain,” published by Wiley last year, as well as launching a popular conference focused on the emerging digital asset economy last May.

Mougayar, who has also contributed articles to CoinDesk, said:

“The value proposition is that I am part of this market. I talk to these companies. I know their CEOs. I know their founders. I know the real story.”

Notably, for more novice investors, the fund will seek to invest in the broader cryptocurrency asset class, beyond better-known options such as bitcoin.

Toward that end, the fund will include allocations of 15 cryptocurrencies that will change based on Mougayar’s outlook on the cryptocurrency space. Currently, Mougayar will hold the largest allocation, at 20 percent of the total index, in ether, and 10 percent in bitcoin.

Three lesser-known cryptocurrencies – steem, nexium and cofoundit – will each represent 10 percent of the index’s holdings. The remaining 10 cryptocurrencies, which include melon, augur and basic attention token, will each represent 4 percent of the holdings.

“Having a basket of cryptocurrencies, managed by someone who knows what they are doing, in a way removes some of the risks for the average consumer,” Mougayar said.

Fund costs and structure

But while new crypto index funds are launching almost daily, Mougayar’s fund seems to be courting a new class of retail investor – those with more experience in cryptocurrency than in traditional markets.

Mougayar’s index charges a relatively low total fee of 5 percent, which is in stark contrast to the very high “two and twenty” fee structure fiat-based hedge funds sometimes charge.

Managers of those funds will typically argue that their research work, and sometimes active trading, drive up costs – and that their returns justify their fees, though that assertion is a highly controversial one. Mougayar told CoinDesk that he charges a premium over the 2 percent sometimes charged by low-fee passive funds because he believes active management can provide investors with substantial additional value creation.

Also, unlike other cryptocurrency hedge funds, Mougayar’s does not require a minimum investment, something that should appeal to smaller retail investors.

“It’s like you’re on an exchange. You can buy 0.1 bitcoin. There is no minimum,” he said.

Diving deeper, Mougayar’s partnership with Iconomi divides two responsibilities typically consolidated in a single firm in other lower-fee tracking funds. (In some ways, you can think of the partnership as a kind of mashup between a low-cost tracking fund and a blockchain-based crypto exchange like ShapeShift.)

In order to invest in Mougayar’s fund, users must first load their account by depositing bitcoin or ether on the Iconomi platform. While Mougayar selects the initial portfolio allocations and re-weights regularly, the investor’s user account will reside on the Iconomi blockchain platform.

An additional advantage of partnering with Iconomi, Mougayar argued, is that investors do not need to manage the custody of their own key pairs.

William Mougayar image via YouTube

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Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.