New fund offers Australian wholesale investors investment-grade exposure to Bitcoin

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A new Brisbane-based Bitcoin capital growth fund for wholesale investors has received inquiries from some of Australia’s largest wealth groups and a superannuation fund, its founder says.

Jeff  Yew left his post as chief executive of Binance Australia in April to start Monochrome Asset Management, a capital growth fund offering pure Bitcoin exposure.

“It’s very rare for a young fund like us in the traditional finance world to have that kind of level playing field,” Yew told Stockhead yesterday.

“It’s one of the exciting things about digital assets in general. It’s so new, that if you present yourself as a leader that knows the details and knows how to solve problems for the institutions, you will do well.

“What’s really lacking is basically a simple product that caters for institutions — that’s invaluable.”

Bitcoin is fairly simple to buy for retail investors, who easily can store their coins on an exchange, an app or a small hardware wallet that costs around $100. But things are more complicated for wholesale investors such as family offices, institutions, companies and super funds, Yew said.

“You probably have an investment thesis and an investment mandate — a very specific set of boundaries that you can and cannot invoke for the kinds of investments,” he said.

Monochrome offers these wholesale investors a regulated investment in the form of a unit trust — “a very well understood financial instrument that institutions and wholesale investors are very familiar with,” Yew said.

A unit trust makes adding Bitcoin to their portfolio as easy as adding any other instrument like real estate or stocks.

The minimum investment in Monochrome’s trust is $50,000, he said. Monochrome is also looking at an exchange-listed Bitcoin ETF for retail investors.
 

Institutional adoption in North America

Yew said Monochrome is the first fund of its kind in Australia that offers secure, easy wholesale access to Bitcoin.

“You don’t have to be exposed to the technology, the learning curve, the risk, the administration burden.”

In the United States, institutions like Cathie Wood’s Ark Invest (with US$50 billion in funds under management) have invested heavily in Bitcoin through Grayscale’s Bitcoin Trust.

“Progression of digital assets is inevitable… If you look into the United States and Canada, it’s a very mature space,” Yew said, adding that Australia seems to follow North America in these matters.

The 2017 cryptocurrency boom was driven entirely by retail investors, Yew said. But since March of 2020 there’s been a lot of institutional adoption from US companies such as Tesla, Microstrategy and Square. Banks such as BNY Mellon, JP Morgan and Morgan Stanley have also been adding crypto services.

“These are some of the largest banks in the world, they’re offering services around digital assets, and that really shows that the infrastructure is trying to keep up with the demand, and that’s a good thing to see.”

Because there haven’t been regulated instruments out there in Australia, institutional adoption is still in its infancy, Yew said.

“But I think the time will come, real quickly, and we sort of steer that ship forward, being that torchbearer for Bitcoin adoption and eventually the first Bitcoin ETF in Australia.”
 

Inflation hedge

Monochrome’s fund just holds Bitcoin, not other crypto-assets like Ethereum or Cardano, but that doesn’t mean they’re Bitcoin maximalists.

“We’re talking zero to one adoption in the institutional world… adding more complexity and adding more products might be good thing, but it’s a harder to sell to people that just want a simple exposure, and that’s really what we offer, a simple, regulated investment vehicle to get exposed to digital assets like Bitcoin.”

Bitcoin serves as a hedge against the increased rate of monetary expansion that’s happening around the world, Yew said.

“We see that rate of monetary expansion grew from five per cent a year to 15 to 20 per cent a year – that effectively means your money is going to be worth less in a shorter period of time.”

In terms of volume and liquidity, Bitcoin is on par with some of the largest exchanges in the world, something Yew said that some institutional investors haven’t quite realised.

“Bitcoin is a very mature financial market these days.”

Yew wasn’t willing to make any price predictions, but said from a “phenomenon standpoint”, digital assets will continue to play a “big, big role” alongside traditional investments like stocks, bonds and fixed income markets.

It’s a time of global monetary uncertainty and unprecedented fiscal policies stemming from the pandemic, he added. The launch of the Monochrome Bitcoin Fund gives Australian financial institutions the opportunity to consider exposure to a new, alternative asset class.

“So that’s something I’m really proud of,” he said.
 

Blockchain in Brisbane

Monochrome right now has a team of six employees working both from an office in Brisbane and remotely around Australia. The team includes people with decades of experience working for fund managers, as well as talent from top banks in Australia and abroad, Yew said.

The team is growing fast, he added.

The fund chose to locate in Brisbane because it’s the “digital asset hub of Australia”, home to cryptocurrency exchanges like Binance Australia, Swyftx and Digital Surge, Yew said.

“It doesn’t exclude our plans to set more offices around cities like Sydney and Melbourne down the line — but right now, Brisbane is home,” he said.

The company’s office overlooks the Story Bridge and has one of the best views in Brisbane, he added.

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