Betterment acquires Makara in push into crypto market

Betterment, the leading independent robo-adviser, announced that it's acquiring cryptocurrency manager Makara Inc. in a deal that marks the company’s first major foray into digital assets.

The Seattle-based registered investment adviser Makara offers automated services that allow users to invest in crypto through passive exposure to digital assets. The company offer seven thematic crypto baskets, which are automatically rebalanced based on predetermined market conditions, allowing the end investors to own the underlying coins.

Terms of the deal were not disclosed.

According to a Betterment spokesperson, in the next six months, Betterment will roll out its own crypto tool using the Makara technology, and Makara will be renamed.

Once Betterment’s crypto tool is launched, it will be available to retail clients, as well as through Betterment For Advisors, the company's business-to-business platform, the spokesperson said.

“Our customers are very interested in crypto, but a little bit intimidated too,” said Mike Reust, president at Betterment. “It’s an interesting asset class that has emerged and can truly improve outcomes, but customers still have a healthy, appropriate dose of skepticism.”

Even after the recent sell-off, which cut the value of Bitcoin in half, retail investors are flocking to gain exposure to the explosive world of cryptocurrency, and digital investment platforms are looking to cash in on the increased interest. 

According to InvestmentNews Research, about a third of all advisers expect to increase their clients’ exposure to digital assets in the coming year. While only 10% of advisers were using crypto last year, 44% believed they would be managing it within five years.

“As we were building Makara, we often took inspiration believing we were building ‘Betterment for crypto,’ so to become part of the Betterment team feels like a natural fit,” Makara CEO Jesse Proudman said in a letter emailed to customers and reviewed by InvestmentNews.

Makara’s index-like portfolios are custodied through the digital asset custodian Gemini Trust Co. When Makara launched in April, customers were only able to access digital assets that Gemini supported, including approximately 45 digital assets, according to its website. 

“Lots of folks are truly putting money into crypto, and a meaningful majority are asking us to help them navigate and solve this space,” Reust said.

Betterment has made it clear under the leadership of CEO Sarah Levy, who took over at the end of 2020, that the company is prioritizing growth, and the platform has been busy rolling out new offerings. 

Betterment for Advisors launched custom model portfolios in February, while leveraging Betterment’s portfolio management tools, and tapped RIA in a Box, RightCapital and Wealthbox to provide breakaway RIAs with a predetermined tech stack, the company announced in June. 

“New CEO Sarah Levy is changing Betterment,” said fintech consultant Bill Winterberg on Twitter. “The question is, is it for the better or for worse?”

The announcement follows a year of triple-digit growth in deposits at Betterment, according to a release. In September, the New York City-based fintech landed a $160 million fundraise, its largest capital round to date, which pushed its valuation to $1.3 billion. 

Betterment’s push to expand into multiple business lines, like its business-to-business arms, has led to explosive growth at the firm, including a 116% year-over-year increase in account openings in the first quarter of last year. To date, Betterment manages $33 billion in assets for nearly 700,000 users, according to the company. 

“A ton of advisers are looking to have some exposure to crypto, but want to do it in a thoughtful way,” said Betterment spokesperson Danielle Shechtman. “They want to do right by their clients and invest responsibly, so having a managed way to do that really satisfies that need.”