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Blockchain & Cryptocurrency
June 2019 www.intellinews.com I Page 22
The ITI Fund is domiciled in Luxembourg where
it is held to the highest regulatory standards. The group has set up several platforms that lower the cost of entry to would-be fund managers offering more traditional products from the fiat-world. Using the same infrastructure, ITI Funds have also set up a crypto-version that is identical to the more familiar fiat-backed assets, except the underlying assets are cryptocurrencies rather than the most usual stocks and bonds.
“When ITI Funds started working with crypto
we realized we had to become an innovator to bring fiat world rules to crypto space. You have to invent a way to unite custody, insurance company, index provider, etc. One of our key demands
was to have real professional custody to escape crypto exchange risks and also offer 100% fund insurance,” Yakolev said in an interview with bne IntelliNews. “Insurance companies just do not deal with it as they do not know how to estimate risks. Its too new. You have to convince a custodian to show its inner structure, backend processes, to an insurance company. Only after that an insurance company will decide if this custody is safe enough to cooperate with. Who wants to share its secrets? Blockchain is a new world.”
The number of custodians willing and able to cater to a cryptofund are few as storing coins instead of stocks remains a novel request. Most coins traded on regulated exchanges are avail- able for professional custody and insurance are included in the index.
The ITI Fund is not unique in offering an index that tracks a basket fo cryptocurrencies, but it is unique in being the only one set up to be able to cater to institutional investors.
“Other indexes have other purposes. Some track the market in general. Some calculate the average Bitcoin price. Our logic is different. We want to track the most developed part of the market. We choose top cryptocurrencies. The coins have to fulfil several conditions such as liquidity, recognition and availabil- ity of an insured cold storage solution,” Yakolev says.
As part of the index methodology there is a 15% cap on any component, which ensures constant diversification.
“Without 15% cap the index will be 50%+ Bitcoin. We’d like to think we created a perfect index for investing,” says Yakolev.
In addition as part of the package to appeal to insti- tutional investors ITI Fund partnered with top index professionals: the methodology of ITI Funds Crypto Index has been checked and approved by MV Index Solutions, a subsidiary of the US fund giant VanEck.
Spring is coming
After the first round of enthusiasm passed crypto- currencies have suffered a crypto winter as inves- tors into the scams and more crazy ideas have taken their losses and have been licking their wounds. But just as in the aftermath of the dot-com bubble the interest in crypto is reviving again as the professionals move in.
ITI Funds Crypto Index Fund has doubled in value YTD and should benefit from the rise of “altcoins” – new coins that are joining the bitcoin family. The ITI Fund is now listed on Bloomberg terminals (ticker: ITIFC) and currently consists of nine crypto assets: Bitcoin, Ripple, Ethereum, Litecoin, Bitcoin Cash, Zcash, Stellar, Ethereum Classic and Bitcoin Gold.
“We are going the extend this number to 30 as soon as other coins meet all index criteria,” says Yakolev. “Bond yields are typically around 5%. The risk is that the issuer will default on the bond and you will lose the whole amount you invested. But you are careful and pick a strong issuer and you can be fairly sure they won’t default. In crypto it is wise to invest only small amount, as the chance of default in this case is a lot higher. But if it comes off the returns are in triple, not single, digits,” says Yakolev.
Gold was trading at $1,277 as of the end of April and flat for the year. The wider MSCI EM index, that tracks all emerging markets, had done a
lot better and was up 12% over the same period, with Russia’s dollar denominated Russia Trading