Creating the next generation of crypto investment strategies
Global Investment Insights
with Dr Michael Kollo, Chief Executive Officer, Clanz
Sponsored
Michael recently joined Clanz in the role of Chief Executive Officer, focusing on creating the next generation of Crypto investment strategies by combining the best human and artificial intelligence algorithms. Michael has responsibility for managing the leadership team’s direction and focus as the company launches their first product to the Australian market and look to expand their product range across different clients.
From a day-to-day operational perspective, Michael’s role sees him moving between contexts like the technology stack, to product research and development, to client research, and to investment expertise and Crypto market news.
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If you are in this space, you are looking at the evolution of blockchain projects, the decentralised finance possibilities, and getting excited by the potential.
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“I think taking a job in a Crypto wealth management firm means operating at the fairly pointy end of the risk and innovation spectrum. If you are in this space like me, you are looking at the evolution of blockchain projects, the decentralised finance possibilities and getting excited by the potential. Equally, you see the wild west of coins and currencies, where bad actors and bad behaviours require careful management and education for new entrants”, Michael remarked.
Although it is too early to say how blockchains, DeFi and Crypto will impact the financial system as a whole over the coming years, Michael believes that the technology is incredibly powerful, be it, its ability to replicate the core functionality of a lending operation, or issuing a homogenous insurance contract, for example.
Yet, the adoption of cryptocurrency as an investable asset class faces challenges among institutional investors, but redefining the lens through which the asset class is viewed from a risk management perspective may offer a means of overcoming these.
Michael explained, “we have become quite narrow in our definition and quantification of risk in the modern financial arena. Risk of fraud, theft, and outright scams are infrequent in most asset classes, and through the extensive use of diversification, barely blip on the holdings of an institutional investor. However, we already invest in hedge funds, and emerging market companies, some of which have completely different accounting and legal standards to our own. With today’s crypto, the currencies represent micro-cap investments, or call options on individual projects or technologies in the blockchain. Framing it in that context (rather than currency, for example) should align much better with the risk models and asset allocation strategies of institutional investors.”
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The optimal allocation to crypto assets ought to align with the ratio of economic activity of the blockchain versus the real economy.
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When it comes to asset allocation, Michael believes that the percentage of a portfolio that ought to be allocated to crypto assets should be closely linked to cash-flows.
In that sense, as crypto evolves to better reflect economic activity taking place in the blockchain (digital realm), these tokens and assets will come to be closely aligned with the value of their economic activities. Therefore, the level of economic activity in the blockchain will come to be a fraction of real economic activity (eg GDP), hence, the optimal allocation ought to align with the ratio of economic activity of the blockchain versus the real economy, Michael concluded.
Disclaimer
All information contained within this publication is general advice only, as the knowledge levels and needs of all individual and corporate investors vary greatly this publication should not be used solely as a decision-making tool, further opinions and information should be sought before making an investment decision. It is the recommendation of Global Investment Institute (GII) that you seek the opinions of a fee-for-service, independent investment adviser before making any investment decision.
The authors, directors or guest writers may have a financial interest as investors, trustees or directors in investments discussed or recommended in this document. It has been assessed by the editors that these financial interests have not had an impact on the material contained here within.
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