Gemini, BITRIA and 3iQ Launch New Crypto SMA and Model Portfolios Platform, Targeting Financial Advisors and Asset Managers with High-Net-Worth Clients
In recent past years, when the term “crypto investing” comes up, reactions from long-established wealth managers, family offices and asset managers catering to more monied clients have run the gamut, from suspicion to outright dismissiveness.
But over the past 20 months in particular, attitudes among professionals serving this more rarefied stratum of clients have begun to shift. Increasingly, firms serving well-heeled individuals and families recognize that digital assets are here to stay, and so hesitations have shifted to the fact that many existing crypto investing solutions simply don’t work for their businesses and their clients.
After all, directly investing in a rapidly proliferating universe of crypto assets would be an incredibly time-consuming endeavour.
A wealth advisor with a multifamily office in the process of assessing digital assets for their clients who asked not to be identified for this story said, “Right now, we view crypto investments as essentially another alternative asset class, similar to leveraged loans or certain hedge funds. And as such, crypto would never represent more than one or two percent in our average client portfolios.”
The advisor notes that he could “easily make research and due diligence on crypto my full-time job, given the volumes of product and information out there.”
“But in what universe does it make sense to dedicate so much time on an asset class that isn’t supposed to take up more than a few percentage points in client portfolios?”
Enter the Q-MAP Platform
And that’s where the latest initiative from cryptocurrency leaders, Gemini, BITRIA (formerly known as Blockchange) and 3iQ US comes into play.
Earlier this week, the three firms jointly announced the launch of a new digital SMA and model portfolios platform, the 3iQ Digital Managed Account Platform or “Q-MAP.”
According to the press release issued by the three firms, Q-MAP provides wealth and asset managers four model portfolio choices and “a fully bespoke investment option.” The platform is a “scalable solution” for to U.S. investors looking for more flexible cryptocurrency exposure.
Digital asset SMAs have not received the same level of media attention as the highly anticipated and oversubscribed crypto ETF launches that took place earlier this year.
For high-net-worth (HNW) investors, however, ETFs tend to lack key features that clients with more sophisticated needs expect, including ownership of the underlying assets for tax loss harvesting purposes.
By contrast, SMA solutions deliver a greater degree of flexibility, customization and other advantages, all of which apply to the crypto space as well.
Wealth Solutions Report recently connected with Chris Matta, CEO, 3iQ US, as well as Dan Eyre, Founder and CEO of BITRIA. (3iQ US is a subsidiary of 3iQ Digital Asset Management, headquartered in Canada).
We discussed their launch of Q-MAP, the timing and growth potential for financial advisors and asset managers seeking to capture the explosive demand for cryptocurrencies in client portfolios, and the future of digital asset management in general.
WSR: Gemini’s strengths and advantages as the 800-pound gorilla in the crypto custody space are widely known already. But for both 3iQ and BITRIA, what was it about the other party that made joining forces for this initiative appealing?
Chris Matta, 3iQ US: The success of any partnership is driven by several factors, but trust and flexibility are two very important ones – BITRIA’s technology and their team exemplified both. The BITRIA technology stack is adaptable allowing our team to develop a product roadmap several years into the future.
Embedded in the technology is the ability for our team to efficiently manage a diversified menu of model portfolios and offer clients enhanced portfolio features like tax loss harvesting.
The platform technology is also integrated with Gemini, an institutional grade native crypto exchange/custody, and account aggregator platform Morningstar By-All-Accounts. Cross platform integrations are important because it can meaningfully improve the client experience during account onboarding and reporting.
And then strategically, the BITRIA team is well aligned with our vision for creating the industry’s leading digital asset investment platform. Over the next 1-3 years the crypto investment ecosystem will evolve, and investor demands will become more complex.
Dan Eyre, BITRIA: BITRIA sees 3iQ as an excellent bridge between traditional finance and the digital asset ecosystem. The company’s current digital assets footprint, with their existing suite of exchange traded products in North America and the Middle East, provides strong brand recognition for investors familiar with the products in the market today.
Over the next three years, we believe this strategic partnership will expand as we develop new functionality collaboratively with 3iQ.
Their team’s deep expertise of traditional SMA vehicles – coupled with their savvy in digital markets – will enhance our ability to deliver highly functional, value-add technology that meets the needs of financial advisors looking to serve their clients in a rapidly developing ecosystem.
WSR: Digital assets seem to be an ever-expanding asset class. How do you envision your Q-MAP platform keeping up with constant launches of new cryptocurrencies?
Dan Eyre, BITRIA: Not all digital assets are created equal. Demand varies greatly by asset, as does the suitability for advisors and institutional clients. BITRIA will focus asset support on the frontrunners on the demand side, while remaining conscious and thoughtful of the regulatory environment and investor suitability.
Chris Matta, 3iQ US: One of the benefits of the separately managed account structure is customizability and the flexibility to scale future investment solutions quickly. That is driven by the simplicity in how the end-investor, the investment manager, and the gatekeeper work with each other – it’s a straightforward relationship governed under an investment management agreement (IMA). The back-end operational complexities and costs associated with certain commingled structures like mutual funds and ETFs don’t exist here.
And so, as the digital asset landscape evolves, and new verticals emerge our SMA platform will be adaptive and well positioned to launch new strategies. Those strategies could be sector specific like in DeFi or Gaming. Or based on portfolio outcomes like generating portfolio yield by staking crypto assets. The power of the SMA platform structure is that it allows asset managers like 3iQ to create tailored solutions that meet investor’s objectives.
WSR: The latest wave of market turbulence has sparked renewed speculation about whether digital asset values are here to stay, or if we are looking at a crypto bubble that could burst in the next 12-24 months. What’s your view?
Chris Matta, 3iQ US: This cycle looks different than the 2017 bubble. The crypto market today is more institutionalized with the entry of wall street trading desks, large hedge funds and corporate buyers of bitcoin. There is stronger adoption. We’ve seen the number of active bitcoin wallets, for example, increase from 5 million in 2017 to 34 million today.
That said, investors need to understand how to properly budget this risk asset. Crypto assets are investments in emerging technologies, and therefore behave more like a venture capital style investment from a risk/return standpoint.
Dan Eyre, BITRIA: Year-to-date, nearly $30 billion of venture capital entered cryptocurrencies in 2021. That’s more than the last decade combined. While the next 12-24 months may bring substantial volatility to the asset class, it’s highly unlikely this turbulence will unseat crypto’s burgeoning role within the investment portfolio.
Additionally, crypto investments have consistently outperformed all other investments over any given two-year period since the emergence of the asset class, and I wouldn’t expect the next 24 months to be any different.
WSR: If you could say one thing to wealth managers and asset managers new to crypto and who are overwhelmed by the volume and complexity of digital asset management information and offerings, what would it be?
Chris Matta, 3iQ US: Don’t get caught driving a yellow cab in a ride sharing world. At a high level, it’s important to educate yourself on the real-world use cases of blockchain technology, the crypto ecosystem, and the investment landscape – who are the players and how is the future operating system different than the present one.
Test the pipes and plumbing out for yourself first. And then, engage with asset managers and industry thought leaders you can partner with to help further educate you and your clients. You don’t have to go on the journey alone.
Dan Eyre, BITRIA: Financial advisors should have a plan and focus on finding the right partners to help them navigate this market and deliver for their clients. Yes, education is important, but for traditional financial advisors, the more important step is to work with crypto-native asset managers who already understand the nuances of the market will drive greater value for clients.
With the right partners, like 3iQ, financial advisors can evolve with the rapidly changing market instead of struggling to find their way alone, just as they should with any specialty asset class.
Michael Madden, Contributing Editor & Research Analyst, can be reached at mmadden@wealthsolutionsreport.com
