Nick Dignam from Fortitude Investment Partners shares insights with Lachlan Maddock from Fortitude Investment Partners on how a diversified portfolio in mid-market private equity is structured. The Inside Adviser
The world of alternative investments is at a crossroads. As markets defy expectations and liquidity concerns take centre stage, investors find themselves forced to rethink how they deploy capital in an increasingly complex environment.
Why advisers can’t ignore bitcoin
Craig Hobart, a veteran of the business side of funds management, is thinking of putting a link to an ASIC podcast on his new company’s website. It provides the regulator’s views on cryptocurrencies.
The new company is the Brisbane-based Monochrome Asset Management, formed in April by a crypto veteran Jeff Yew and where Hobart’s younger brother David, had already joined as CIO.
Yew’s ‘veteran’ status comes from being part of the crypto investment world (although it is still being questioned as an investment), dating back 13 years as a private investor and three years in business. An architect by training, Yew became chief product officer of a travel agency called TravelbyBit in January 2018, a crypto-friendly flight booking service that was taken over by a blockchain-based accommodation booking company, Travala.com.
Yew then co-founded a digital asset brokerage platform called Binance Lite, and later Binance Australia, an AUSTRAC-registered digital asset exchange platform.
For Monochrome, Yew has gathered up some traditional funds management industry management, such as the Hobart brothers, and traditional service providers under a very traditional boutique fund structure.
The fund manager is an index-tracker through a traditional unlisted unit trust, with trustee Non-Correlated Capital and administrator A-4 Funds, an alternatives specialist, and custodian BitGo, a crypto specialist. While the big asset servicing custodian banks are all working on their digital asset strategies, none has as yet announced a significant offering to the market, but they are getting ready to do so.
Monochrome’s non-staff local and international shareholders include Charlie Lee, the creator of Litecoin, Samson Mow the CSO of Blockstream, and Kain Warwick, the Sydney-based founder of Blueshyft and Synthetix, a software developer-turned venture capital investor.
Their entry prices value the company at US$15 million, Yew says, “further demonstrating the growing interest of institutional investment in digital assets”. Like traditional boutique managers, Monochrome has sufficient funding to be relaxed about short-medium-term fund flows.
Craig Hobart (he is the eldest of four boys), has held a range of senior positions in funds management. His most recent full-time role, before getting into the world of start-ups, was as general manager, strategic relations, at industry fund Rest. Before that he had spent five years at Nikko Asset Management, starting as head of retail distribution and ending up as managing director. Before that, he was head of retail asset management business at ABN Amro, an investment specialist at what became DWS group and before that an account manager at BT Financial.
The reason he likes the ASIC podcast, narrowcast since June, is that the views expressed pretty much match those espoused by Monochrome. He nominates some of the ASIC views which he sees most appropriate as:
- ‘Low interest rate investors looking for high returns make bitcoin appealing’
- ‘Putting bitcoin and all other crypto into one basket is a mistake’
- ‘Bitcoin supply is limited; no issuer or entity is behind it, [it is] volatile but so far has maintained its monetary value’
- ‘Most crypto assets won’t perform like bitcoin’
- ‘There is a growing push for crypto assets to be accessed via a more traditional investment product such as an ETF’
- ‘[We are] seeing significant sections of the market getting ready’
- ‘[We are] seeing institutions getting into the space since 2020’, and
- ‘Speaking to a financial adviser is a good first step’.
For the full 15-minute podcast go here.
Hobart says he wants Monochrome to be able to provide as much educational material as possible on bitcoin and the crypto world. Monochrome aims to be as “institutional grade” as possible.
“Bitcoin has been around now for about 13 years,” he says. “Even the regulators are talking about it. There are more than [tradable] 700 crypto assets. We are trying to attract the wholesale market. We want the market to see what crypto is and, more importantly, what it isn’t.”
He says Monochrome provides access in a “safe way” through a familiar vehicle with established systems and the safeguards of experienced third-party providers, such as the custodian and RE. The coins are in “cold storage” for the highest level of security.
The product is not designed for speculation by day traders. The manager accepts applications and redemption for units in the trust on a monthly basis. Importantly for the advisers it is targeting, Monochrome does not take directional views on the price of bitcoin, tracking the CME Bitcoin reference rate in Aussie dollars, unhedged.
For Australian advisers and institutions, bitcoin has an important thing in common with currencies such as the US dollar and euro. That is, they can not have a view. With currencies, they need to hedge or not, either way facing regret risk or risk of physical losses. It’s exactly the same with cryptocurrencies.
