- The RWM WisdomTree Crypto Index will allow financial advisors to execute this strategy through a packaged direct indexing solution
- Direct ownership of crypto assets through the index is a superior way to get exposure compared to yet-to-be-approved spot bitcoin ETFs, Onramp Invest founder says
WisdomTree and Ritholtz Wealth Management have created an index designed to offer retail investors exposure to the crypto market through a financial advisor.
WisdomTree is an ETF issuer and asset manager managing roughly $76 billion assets globally, and Ritholtz Wealth Management is a New York City-based RIA that offers financial planning and asset management services to high-net-worth households, corporate retirement plans, endowments and charitable foundations.
The RWM WisdomTree Crypto Index is currently made up of 36% bitcoin (BTC), 20% Ethereum (ETH) and 4% each of 11 other crypto assets, which include payment systems, smart contract platforms, layer-2 protocols, oracle networks, crypto indexing services, decentralized finance and the metaverse.
Aside from BTC and ETH, the other coins within the index are Fantom, Terra, Polygon, Uniswap, Aave, Sushi Swap, Yearn.finance, Decentraland, Enjin, Chainlink and The Graph.
“As wealth managers, we have a responsibility to adapt our portfolios to this burgeoning opportunity,” Michael Batnick, Ritholtz’s director of research, said in a statement. “As fiduciaries, we have an obligation to do so in a sensible way while harnessing the benefits of increased diversification.”
Offering advisors access to crypto
The index has been licensed to Onramp Invest, an integration platform that provides access to crypto assets for registered investment advisors (RIAs). It is available to financial advisors using its technology platform to manage separate accounts of clients.
Onramp Invest will supply the SMA architecture, rebalancing technology and customer support for financial advisors. Gemini’s custody infrastructure and crypto-native exchange will drive the index’s creation, according to the firms.
The RWM WisdomTree Crypto Index is the best assembled structure and diversified crypto asset exposure currently available to US investors, and particularly the RIA community, argued WisdomTree Chief Investment Officer Jeremy Schwartz.
“Advisors have had a tough time getting access to crypto,” he told Blockworks, noting that there are not yet spot crypto ETFs in the US that they can buy through their brokerage accounts. “Retail is very much to direct, but it’s hard for advisors to manage that the way they manage their practice.”
The lack of crypto access for advisors was a key reason WisdomTree invested in Onramp Invest, Schwartz added. WisdomTree introduced crypto model portfolios for advisors in May, which it noted at the time were available through Onramp Invest and with integration into Gemini.
Eric Ervin, co-founder and CIO at Onramp Invest, said there is $90 trillion of assets in the hands of RIAs and only a small percentage of them have gotten involved in crypto.
“Now we’re kind of opening that door so financial advisors can actually say yes when the client says, ‘Do you offer crypto asset exposure?’” he told Blockworks.
Ervin founded Reality Shares, an asset management firm, ETF issuer and index provider. The company became Blockforce Capital in 2018.
“I literally sold my ETF company because the thought of creating another ETF that owned bitcoin was silly to me,” he explained. “It was like putting training wheels on a Ferrari when really what people need is the exposure in direct form and taking self-custody.”
Gemini allows that direct ownership of crypto assets, Ervin explained. The company became a qualified custodian chartered by the New York State Department of Financial Services (NYDFS) under Section 100 of the New York Banking Law. Gemini hit $30 billion in crypto under custody in May.
“It’s not wrapping everything up in an ETF and hoping that it will get approved, but actually buying assets directly with a qualified custodian,” Ervin said. “We want to give [advisors] the education that [they] need because there’s still a lot of confusion about what is a qualified custodian.”
WisdomTree’s crypto-focused approach
WisdomTree has been focused on how blockchain can change the financial world, Will Peck, the firm’s head of digital assets, told Blockworks last month, noting that the firm is looking to bring more crypto products to investors in 2022.
WisdomTree CEO Jonathan Steinberg said during the company’s third quarter earnings call in October that he sees a big opportunity for advisors to give their clients crypto exposure through models and separately managed accounts in the US. He noted that the latter vehicle may be financial intermediaries’ preference amid regulatory uncertainty around crypto ETFs.
Though WisdomTree has filed to launch a spot bitcoin ETF in the US, the Securities and Exchange Commission (SEC) has not yet approved ETFs that would invest in crypto assets directly. The agency last month rejected fund manager VanEck’s proposed bitcoin ETF as its 240-day review period of the planned offering was set to expire.
WisdomTree has physically backed bitcoin and ether exchange-traded products (ETPs) available in Europe and added three spot crypto ETPs to its lineup of offerings in the region last week.
The trio of new ETPs track three different indexes. The Crypto Mega Cap Equal Weight index invests exclusively in bitcoin and ether while WisdomTree’s Crypto Market index exposes investors to a diversified basket of crypto assets representing about 70% of the cryptocurrency market capitalization, including BTC and ETH. The firm’s Crypto Altcoins offering excludes bitcoin and ether, as its index comprises assets such as cardano, bitcoin cash, litecoin, polkadot and solana.
The firm could look to expand its index offerings in the US beyond the RWM WisdomTree Crypto Index as the space continues to mature.
“There are all sorts of strategies you can do, but partly you don’t want to confuse the market and have too many choices,” Schwartz said. “As sectors evolve within crypto … those are all candidates of themes.”
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