Digital Assets Digest – September 2022, Edition 2

Welcome to the second installment of the Monthly Digital Assets Digest powered by Venn by Two Sigma – your guide to the state of capital allocation in crypto.

In this newsletter, we dive into the latest developments impacting advisors, asset owners and managers to help institutional investors allocate capital to digital assets with confidence.

It's been a busy summer for crypto, so let’s get into it. Here are the must-read headlines we’re tracking:

1. How The Ethereum Merge ‘Completely Changes’ Ether’s Investment Case for Institutions

With the Ethereum Merge now complete, pension funds and insurance companies are coming around on the prospect of allocating to crypto. While Ether investment products saw outflows of $62 million the week before the merge, the completion of the upgrade is expected to appease investors, particularly those with ESG mandates. Despite the initial jitters, CoinShares Research Head James Butterfill predicts Ethereum could lead inflows and potential price appreciation towards the end of the year.

2. Asset Owners Are Turning to Investment Consultants to Guide Them on Complex Portfolios

Asset owners are increasingly leaning on investment consultants to help them navigate market volatility and greater portfolio complexity, including the addition of crypto – according to a new report from Cerulli Associates. The report’s findings show that 27 percent of investment consultants currently cover cryptocurrency, and 18.8 percent of investment consultants said they had at least one client with an allocation to crypto assets.

3. White House Is Eyeing Crypto Mining’s Impact on Climate Change

The White House Office of Science and Technology Policy published a report this month revealing that digital assets could have significant environmental impacts – citing crypto as the worst offender – and proposed recommendations on how to limit their contribution to climate change. The report suggests that the EPA, Department of Energy and other federal agencies work with local entities and the crypto industry to develop environmental performance standards for crypto technologies.

4. Shaking Off Bears, Investors Drove Year’s Biggest Crypto Inflows in July

Investors, shaking off one volatile trading session after another, are once again bullish on crypto, according to recent data. Flows into cryptocurrency investment funds and related products in July marked a reversal from June, good for the strongest monthly inflows this year, according to a report from digital asset-focused investment manager CoinShares.

The latest on major financial institutions navigating crypto:

1. Asset Manager Brevan Howard Reveals Details About Its Record-Setting $1B Crypto Hedge Fund

Last month, media reports suggested that global asset management giant Brevan Howard had raised more than $1 billion from institutional investors across various sub-entities to create the largest crypto-focused hedge fund to date. Now-publicly available SEC filings show Brevan Howard submitted a filing for the Digital Asset Multi-Strategy Fund Ltd hedge fund, which alone has raised $184.15 million since sales opened on April 1.

2. Franklin Templeton Preps First Institutional Crypto Accounts

Franklin Templeton is set to offer cryptocurrency-focused separately managed accounts (SMAs) to investment professionals for the first time. The move is the latest example of a traditional finance giant diving into digital assets — despite the ongoing bear market. The launch follows Franklin Templeton’s strategic investment in SMA platform Eaglebrook Advisors in April.

3. BlackRock Pushes Into Crypto Market with Bitcoin Private Trust

BlackRock has announced the launch of a spot bitcoin private trust, deepening a push into digital assets as the crypto industry recovers from the fallout of a credit crisis. The world’s largest asset manager said in a blog post that the private trust would be available only to institutional clients in the U.S. but gave few other details. The move by BlackRock potentially puts the investment house into competition with Grayscale, the world’s largest investment vehicle for cryptocurrencies.

4. Scaramucci’s SkyBridge Sticks With Crypto Despite Heavy Losses and Redemptions

The selloff in crypto, as well as the broader market downturn, has left Anthony Scaramucci’s SkyBridge Capital’s flagship fund of funds down 25 percent for the year through the end of July. As markets began to recover, the multi-adviser hedge fund portfolio, called Series G, recouped some of those losses and was down 22 percent by the end of last week, Scaramucci told Institutional Investor in an interview late last month.

In case you missed it, here’s what we’ve been up to:

Last week, Venn announced a strategic alliance with Coin Metrics, a leading institutional crypto financial intelligence provider, to provide platform users with digital asset returns data – as part of Venn’s broader strategy to support allocators seeking to contextualize crypto in a multi-asset portfolio.

Calculated in U.S. Dollars and Euros for over 475 assets, Coin Metrics’ reference rate data will provide Venn users with reliable digital asset returns data that they can use to help create powerful, factor-based workflows. Check out our recent blog post, Inside the Black Box of Crypto Data , to learn more.

Following our partnership with Coinbase last month, we recently presented our first joint webcast, aimed at educating professional investors on how to approach building a risk and allocation framework to analyze digital assets as part of an institutional portfolio. View the recording here.

For more insights on how to take a quantitative approach to multi-asset portfolio risk and decision making, visit our blog at VennSights.

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