Iconic aims for one stop shop status in crypto ETPs
German-headquartered Iconic Holding is a global crypto asset management group, with offices in Singapore, Dubai and New York. The firm, under its Iconic Funds subsidiary, recently launched its first physically backed bitcoin ETP on the Frankfurt Stock Exchange, with the ticker XBTI, and on the Swiss Stock Exchange on May 28, 2021.
Iconic Funds, a joint venture of Iconic and Cryptology Asset Group, founded by Christian Angermayer and Mike Novogratz, is planning to issue a series of crypto asset index investment vehicles. “Our goal is to offer a cost-effective investment vehicle that fully meets institutional investors' demands in terms of quality, security, robustness and tradability,” the firm says, with their first product issued with a total expense ratio of 0.95 per cent.
Michael Geister, the newly-appointed Head of Crypto ETPs explains that his background, with ETF Securities, has set him up well in the new world of cryptocurrency assets. “Bitcoin allocation is digital gold for 90 per cent of the investors I talk to,” Geister says. “I started at ETF Securities with their physical gold products and you can see a lot of similarities and parallels with the start of the physical precious metals ETPs that started around 2007 – there is a parallel.”
While, Geister concedes that there are different drivers for cryptocurrency assets, he does find it fascinating to be inside a new asset class.
Iconic launched a Malta-based fund in 2020 that offers a broad exposure to top 20 cryptocurrencies and is was aimed originally at qualified investors and the family offices market. In July the firm launched a fund based on Coin Metrics Momentum Strategy, which allocated to the top 10 cryptocurrencies or cash, depending on momentum signals.
“This new asset class offers diversification, low correlation to other investment classes and is a unique technology,” Geister says. “There is an investor base which sees already the potential of the new asset class but are largely part of the conservative investor base and are cautious and waiting on the sidelines. With an acceptable regulated product, it will be another level of confidence.”
Geister believes that if you add cryptocurrencies into a portfolio, maybe even at just 1 to 2.5 per cent, the risk-return-profile improves, reflecting increased returns and lower risk. However, he admits that cryptocurrencies are currently much more volatile, up to three times more volatile than the typical volatility of an equity benchmark like the S&P 500, if not five times, quoting a mean average volatility of 15 for the S&P500 and 60 for cryptos.
The new ETP structure, listed on the Frankfurt, SIX and Euronext stock exchanges, is the only route to getting into a single underlying cryptocurrency, bitcoin in this instance, through an ETF-like product - it’s a debt instrument backed by the underlying, as Geister explains.
The custodians are Coinbase and Fidelity Digital Assets, and the trading is supported by a range of authorised participants and market makers.
The other part of the Iconic Group is a venture capital company, Iconic Lab, and also a hedge fund platform which enables hedge funds to offer crypto strategies. Back at Iconic Funds, they have ambitions to produce baskets ETPs of thematic ETPs and ETPs structured as something Geister calls ‘yield generating farming’. “We think that is the way to differentiate ourselves from the competitors and that thematics will be a play for investors. We want to be a one stop shop,” he says.