In a previous piece, I introduced the concept of “store of wealth” or the idea that on-chain rails can lower barriers to entry and radically scale operations for financial advisers and wealth managers. Just as Shopify enabled anyone to launch a retail business online, Crypto gives a new generation of investment staff the opportunity to start and scale advisory companies without the older layers of tradfi infrastructure.
This democratization of counseling shadows broader changes in asset management. Because when you zoom out – beyond the advisor and beyond the assets – you start to see something else: a transformation in the investment strategies as well as in the machines behind them.
You read Crypto Long & Short, our weekly newsletter with insight, news and analysis for the professional investor. Sign up here to get it in your inbox every Wednesday.
Tokenization will reshape all asset classes
In addition to counseling, crypto and tokenization are ready to re -develop entire asset classes by making assets globally available, fractionalized, composible and marketable 24/7. Consider stableecoins, which by 2024 relieved $ 27.6 trillion in transfers on chain that surpassed the combined volume of visa and mastercard. Efficiency is clear: Transactions immediately run throughout the world with much lower friction and downtime. Even traditional fixed products such as money market funds take place on-chain. Traditional money market funds charge about 10 to 25 basic points in fees, while crypto rails can significantly trim these costs. A Boston Consulting Group study estimates that fund tokenization can add around 17 base points for annual returns (or about $ 100 billion a year globally) by eliminating operational inefficiency. In short, tokenization always makes markets open and hyper-effective, locking of assets for a global investor base.
From active transparency to strategy transparency
It is now a consensus view that tokenization also brings greater active transparency. On-chain reserves and transactions can often be revised in real time. However, active investment strategies and managers are still a black box. We can monitor tokenized assets on-chain, but the logic of how portfolios are controlled is still opaque when strategies live off-chain. While anyone can inspect the inventory of a defi lending contract, one cannot yet look into a hedge fund’s streams, allocations and finances in the same way. The next boundary brings the same transparency and composition to the strategies and their leaders themselves, not just the underlying assets.
Hedge funds today: large, exclusive and opaque
Hedge funds are privately managed pools of capital using complex trade and risk management techniques to seek absolute returns. Globally, hedge funds monitor trillions in cross-strategies assets ranging from stocks and credit to global macro and quantum models. Their investor base is almost exclusively institutional investors and Ultrahøj network (UHNW) individuals who often gain access to through private banks or feeding funds. Direct investments typically require being an accredited or qualified investor with typical minimum obligations of $ 1 million or more (elite means often require $ 5 million to $ 10 million).
Many investors receive exposure through Fund-of-Fonds, which bundle more hedge funds for diversification, but add another layer of fees, often ~ 1 to 1.5% annual management fees, plus 10% of the performance on top of the underlying funds’ “2 and 20” fee structure. These vehicles remain opaque and reveal minimal information about possessions or trades. Investors must rely on leaders who only provide periodic and partial insight into their strategies. Access is exclusive and information is button.
Click here to see the rest of the article.
