Arbor Digital and Blockchange Launch Separately Managed Accounts for RIAs

As bitcoin extended its Tesla-fueled rally to hit a record $48,000 Thursday, registered investment advisers are feeling the pressure to get their clients exposure to digital assets, something that has been historically difficult to do. 

Digital investing platform Blockchange partnered with Arbor Capital Management to launch the True Digital Asset Separately Managed Account, an investment vehicle designed to give clients diversified exposure to digital assets, earlier this month. 

“Arbor’s True Digital Asset SMA marks the emergence of the first SMA that creates value for investors across the entire asset class, rather than being limited to just Bitcoin or Ethereum,” said Dan Eyre, CEO of Blockchange, in the firm’s announcement. “This space is growing fast and it’s critical for firms to select partners that are equipped to meet future needs, rather than just the needs of the moment.” 

RIAs could send clients seeking digital asset exposure to an exchange like Gemini or Coinbase, but these operate outside the RIA’s existing brokerage platform and often come with added transaction fees, Eyre said. There are also a variety of cryptocurrency exchange-traded products, like Grayscale’s Bitcoin Trust (ticker GBTC), but investors are forced to pay high premiums. 

“Arbor began looking in 2018 for solutions for our own clients. And at the time, it was pretty limited,” said Matthew Kolesky, president of Arbor, during a recent RIA Digital Assets Council webinar. “This SMA is a solution we can offer our clients that eliminates the premium risk, and they can own the asset in an account in their name.” 

The True Digital Asset SMA operates similarly to a Digital Turnkey Asset Management Platform, but unlike DTAMPs, SMAs do not require RIAs to actively manage the assets. 

“If it’s going to be a five percent allocation within your client’s portfolio, do you really want to spend 20 or 30 percent of your time keeping up with the market managing?” said Eyre. “Most advisory firms are not going to want to do that and that’s why the SMA approach is a good one.” 

Arbor’s SMA launch comes amid a series of new bids for a cryptocurrency exchange-traded product, which would offer an additional way for RIAs to expose clients to digital assets.

Alternative asset management firm Valkyrie filed for a bitcoin ETF last month, although the Securities and Exchange Commission has never approved a digital asset ETF.

“I believe that we are going to see a Bitcoin ETF within 18 months, and I’ve been saying that for five years,” said Ric Edelman, founder of RIA Digital Assets Council. “We’re all looking forward to a Bitcoin ETF, but we have to ask ourselves, by the time it comes out, what’s the price of bitcoin going to be? And how much upside might we be continuing to miss by saying ‘I’m not going to engage until there’s a Bitcoin ETF?'”