Blockchange is introducing a separately managed account option in hopes that it will help advisers manage digital assets on behalf of clients.
In partnership with Arbor Digital, a division of wealth management firm Arbor Capital with more than $250 million assets under management, Blockchange launched the True Digital Asset SMA, according to an announcement last Tuesday. The new SMA tool enables RIAs to outsource the management of their client’s digital portfolios to Arbor Digital, which actively constructs digital asset portfolios by using a framework to account for protocol maturation, ecosystem adoption rate, and project governance.
Here’s how it works: Arbor Digital manages the SMA by leveraging Blockchange’s BITRIA Digital Turnkey Asset Management Platform to onboard clients and manage portfolio allocations, with all assets custodied by Gemini Trust Co.
While financial advisers who want to expose their clients to digital assets today have several options via digital trusts and funds such as the Grayscale Bitcoin Trust (GBTC) or the Bitwise 10 Index Fund, digital trusts can expose investors to premium risk and are frequently limited to a single asset, according to the announcement.
With the launch of Arbor’s True Digital Asset SMA, Blockchange is addressing the advisers' struggle to incorporate digital assets when the risks aren't worth the return on investment, said Blockchange CEO Dan Eyre.
"RIAs don't want to manage digital assets and they don't want to take the time to learn the asset class,” Eyre said. “But they know they have to take an allocation somehow, and they get the investment thesis, and they know what the upside is. The concern that those advisers typically have is how to keep digital assets under their overall AUM umbrella.”
In that light, the new SMA tool removes the legwork of digital asset allocations and also exposes advisers to a wider range of assets from Bitcoin and Ethereum allocations to a spectrum of DeFi (decentralized finance) and utility tokens.
"Vehicles like the Arbor True Digital Asset SMA simplify the journey for RIAs who want to engage with digital assets," said Ric Edelman, founder of the RIA Digital Assets Council. "Advisers need solutions like this that make it easy to add digital assets to client portfolios."
Silicon Valley-based Blockchange gives an adviser discretionary investment management over digital assets including Bitcoin, Ethereum, Bitcoin Cash and Litecoin, among others, purchased through a qualified custodian and exchange.
There are two ways that advisers can participate in the BITRIA platform. The first is by onboarding their client accounts directly into the platform as well as the custodian and adopting a model-based approach — portfolio changes are made to all clients at once — or on a client-by-client basis, said Eyre.
Alternatively, an adviser can use the platform by a separately managed account structure. “Using this structure offers a variety of benefits versus a fund, such as deeper customization and flexibility, superior tax benefits, and ownership of the underlying assets — which is particularly critical in the digital asset ecosystem,” Eyre said.
Separately, the popularity of digital assets continues after Tesla Inc. CEO Elon Musk helped push Bitcoin to another new high this week after announcing a $1.5 billion investment in the cryptocurrency. Musk also said the electric-car maker is preparing to accept Bitcoin as a form of payment. Musk’s influence pushed Bitcoin prices to a new all-time high of $48,000 Tuesday, according to Bloomberg.
“That served as a great reminder that the future of Bitcoin or other cryptocurrencies is in its ability to become more currency-like,” said Chief Investment Strategist for Ally Invest Lindsey Bell in an email. “The case for Bitcoin has been shifting from a way to get illicit deals done, to an inflation and currency hedge, to where we are today: Bitcoin is increasingly being thought of and used as an investment vehicle and as a form of payment.”
As an investment, Bitcoin is still a very volatile asset class, Bell said. Despite the murkiness of digital assets, financial advisers are increasingly suggesting this as an alternative asset class to customers, Bell said.
“Ultimately, I’m encouraged by the evolution of Bitcoin, but the cases for Bitcoin as an investment or a payment are in very early stages,” she said. “Growth is likely to happen quickly, but will require financial infrastructure and regulation to be developed. Risks are still being assessed as well.
"No doubt, Bitcoin has been fun to follow over the past several years,” she said. “I don’t expect the drama to slow down any time soon.”
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