French asset manager launches first bitcoin mutual fund
One of Europe’s largest asset managers is planning to launch Europe’s first mutual fund based on bitcoin, building on the market’s growing interest in cryptocurrency.
Tobam, a Paris-based investment bank that currently has around $9 billion (£6.8 billion) of assets under management, will soon launch an unregulated bitcoin fund that will allow institutional investors to gain exposure to the online currency.
Investor interest is said to be high after bitcoin surged by 5000 per cent against the dollar so far in 2017, hitting an all-time high price of $8,229 last week. There are already more than 55 dedicated cryptocurrency hedge funds now in existence and open to investors, while exchange operator Chicago Mercantile Exchange Group has already detailed plans to launch futures products based on bitcoin.
Before asset managers and other professional investors are permitted to buy bitcoin and other cryptocurrencies there are several regulatory hurdles that have to be jumped, with lawmakers citing the possibility of online currencies to be used in money-laundering or cyber theft.
In essence, bitcoins are only comprised of strings of computer code rather than a physical item against which money can be secured. As a result, financial regulators like the UK’s Financial Conduct Authority or the American Securities and Exchange Commission do not regulate such products, and traditional mutual funds or exchange traded funds (ETFs) cannot hold them.
By classifying this new bitcoin fund as an alternative investment vehicle, however, Tobam have sidestepped many regulatory problems as the product is not traded on an exchange and does not come under a regulated fund framework called Uctis. It does share some features with other, regulated funds, namely that its value will fluctuate daily based on bitcoin’s price at market close.
Yves Choueifaty, Tobam’s founder, confirmed that it did require permission from the Autorité des Marchés Financiers, the French capital markets regulator, to launch the fund after assuring them that the framework for it “is protective of investors”.
“How to run the money and invest in cryptocurrencies is quite elaborate,” he added. “We found some investors to launch the fund and we have had a lot of interest from an intellectual point of view.”
Tobam’s product effectively averages out the gains and losses made from investment in bitcoin, adding a level of sophistication hoped to attract traditional investors.
The investment firm’s head of business development said that for many, direct investment into bitcoin represented an “operationally challenging” process thanks to stringent security measures.
He added: “"Our goal is to take control of these operational challenges in order to facilitate access for qualified investors willing to gain exposure to Bitcoin. All of that under the format of a fund."