The asset management industry has been following a path of consolidation towards bigger corporate structures during the last 10 years. The hedge fund industry, in particular, has developed into a more standardized and regulated sector. High setup costs and requirements of a minimum 50 Million US Dollars or even much bigger initial Assets Under Management (AUM), automatically exclude the smaller players from the market. Reason behind such high minimum AUM requirements are high costs of providing Prime Broker services to funds: costs like Net Assets Value (NAV) estimate, collateral accounts, management company costs, legal and advisory costs. Furthermore, investment funds and management companies are in most cases no more than P.O. Boxes; by this we mean that they do not actually employ anyone, they are just offshore corporate structures.
The Ethereum protocol provides the perfect technology for creating investment vehicles on the spot, allowing subscriptions and redemptions in real time, trading on decentralized exchanges in a trust-less manner, so that no administrator or custodian is needed, allowing for a level of efficiency and transparency in the industry never seen before. One positive externality of our proposed model is that, by being agnostic of the AUM size, it is also possible it will be used as a tool to building one’s track record in order to get a job at major investment funds, hence improving visibility for traders. Either way we are to lay down the path for changing how things are done in asset management. |
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March 2020
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