Valkyrie Adds Crypto SMAs as Institutions Eye Digital Assets

Valkyrie Investments’ new crypto SMAs follow parallel offerings from TradFi players Franklin Templeton and Ark Invest

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Valkyrie CEO Leah Wald | Source: Valkyrie

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key takeaways

  • Pensions, endowments and corporations likely to pivot to these types of products once markets stabilize, according to Valkyrie’s head of distribution
  • SMA wrappers allow for more curated exposure management than other securities offerings

Valkyrie Investments has added new separately managed accounts (SMAs) for financial pros looking to offer crypto exposure to clients, becoming the latest fund group to utilize the wrapper. 

The launch comes on the heels of similar offerings by Franklin Templeton and Ark Invest as industry watchers have said various institutions are seeking entry points into the asset class despite the bear market. 

Financial wrappers allow pools of assets to be structured and sold as a single security — in this case, cryptocurrencies into an SMA.

Available to financial professionals and registered investment advisors (RIAs), Valkyrie’s new SMAs include a strategy focused on bitcoin, one investing in bitcoin and ether, and another more diversified option. 

The latter SMA holds between five and 10 of the company’s highest-conviction opportunities across layer-1 and layer-2 protocols. Aside from BTC and ETH, the portfolio currently includes solana (SOL), polygon (MATIC) and polkadot (DOT), according to a fact sheet. 

While the bitcoin and BTC/ETH accounts aim to maintain at least half of the portfolio in those assets, the diversified SMA seeks a minimum position of 40% in digital assets — with the remaining assets parked in cash. The three accounts each carry a management fee of 150 basis points and have minimum investments of $25,000. Gemini is the custodian for the SMAs.

Crypto SMAs allow direct ownership of digital assets

Valkyrie has three crypto-focused ETFs trading in the US with about $20 million in combined assets: Bitcoin Strategy (BTF), Bitcoin Miners (WGMI) and Balance Sheet Opportunities (VBB), the latter of which consisting of public companies with bitcoin exposure.

Those three offerings are down between 52% and 67% year to date, alongside wider crypto markets. The Tennessee-based firm, which launched its first multi-coin trust for accredited investors in April and an Avalanche-focused investment vehicle the following month, is now using a different vehicle to offer exposure to the segment.

SMAs allow investors to have direct ownership of digital assets without the risk of holding them in separate wallets or on brokerage or lending platforms, John Key, Valkyrie’s head of distribution, told Blockworks. This is opposed to ETFs and other ETPs, in which investors own shares in the underlying fund, rather than its assets.

The SMA wrapper can be attractive to asset managers, advisers, RIAs and family offices in part because of the vehicle’s prevalence in traditional markets, he added.

“As the macro-economic picture and the broader financial markets have continued to deteriorate, more investors are starting to see this as an opportunity at an attractive entry point, based on beliefs over where long-term valuations may head,” Key said. 

“Eventually, based on conversations we’re currently having with pensions, endowments, corporates and other large institutions, we expect them to pivot to these kinds of products once the markets stabilize and they become comfortable with the track record.”

The new Valkyrie SMAs continue somewhat of a trend in crypto product development, as more fund managers are utilizing the vehicle for the asset class.

Franklin Templeton, which manages roughly $1.4 trillion in assets, revealed last month that it would be making available two crypto-focused SMAs. Ark Invest said Monday that it would offer similar accounts later this month.

A survey published in March by Cerulli Associates found that 45% of financial advisers expected to use crypto in the next two years due to client requests.

Nina Tannenbaum, head of business operations at Algorand, said that crypto SMAs will become even more prevalent as institutions start to add early exposure to more traditional portfolios.

“They allow portfolio managers to cultivate an isolated investment and risk profile across their desired crypto exposures while ringfencing from the broader portfolio,” Tannenbaum told Blockworks. 

“This will enable more curated exposure management, easier risk oversight and hedging of the direct crypto exposures, while also affording the chance to contract with best-in-class crypto sub-advisors and Web3 asset managers.”


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