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Laurent Kssis, CEC Capital
Laurent Kssis, CEC Capital

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Apex steps into tokenizing alternative funds and issuing crypto ETFs

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Alternative asset administrator, Apex Group, with USD3 trillion in AUA, oversees a sizeable cryptocurrency fund business of 70 plus cryptocurrency funds and is stepping further into crypto and tokenisation. 

Bruce Jackson is Chief of Digital assets Funds and Business at Apex, and a board member of Issuance.Swiss AG, a new foundation structure designed to enable asset managers to sell cryptocurrency strategies into their clients’ conventional accounts, from an arm’s length entity. 

Of Apex’s USD3 trillion in AUA, USD2 trillion is in relatively illiquid alternative strategies, with the remainder in open ended funds and SPV holding structures for institutions and large investors.  Jackson says that the firm’s digital team is leading the industry in tokenising these conventional fund products for their clients. 

“We enable our clients to put conventional fund products into digital accounts, by creating a digital share class, and a blockchain-based registry,” he says.

This month, the Luxembourg regulatory regime has given approval for Sygnum Bank, Hamilton Lane and Apex to create this structure, offering a digital share class of the Hamilton Lane GPA Fund for subscription, directly into a Sygnum Bank crypto account.

“We will administer this using the blockchain as the book of record,” Jackson adds.

“Normally, investing with Hamilton Lane requires a minimum USD5 million subscription, confining availability to institutional investors and large family offices. This digital share class enables a much wider group of investors to invest as little as USD1,000 with Hamilton Lane.  We could have created a feeder fund, but that would add cost and illiquidity. Hamilton Lane wished to deliver their industry-leading alpha directly into their client’s accounts, large and small.” 

“We are again creating an automated platform, offering a new channel for AUM growth for our clients, delivering their alternative strategies into crypto accounts.”

Headquartered in Bermuda, Jackson says that the sector needed an automated platform to enable asset managers to sell more product and a wider variety of fund strategies, with an accelerated time to market, and a low turnkey cost.   This they have built, he says, within the Issuance.Swiss AG platform, working with Xetra on the Deutsche Borse and the SIX Exchange. 

Jackson explains that he and his colleague on the Issuance board, Laurent Kssis of CEC Capital, made a call late last year that fees were going to compress for Digital Exchange Traded Funds and Products. “We correctly predicted that when the SEC approved the spot bitcoin ETFs, fee compression would be an instant race to zero,” he says.

“In addition to managing costs and time-to-market, it is critical to structure these funds correctly.   As the issuer/manager of an ETP or ETF, the asset manager must consolidate the invested assets on their balance sheet, which can be a challenge for some organisations, when it comes to crypto assets.  Apex Group transfers this role to Issuance.Swiss, enabling asset managers and distributors to sell crypto strategies to their clients without the impacts of consolidation,” Jackson explains.

“Our client manages the product. Our distributor sells it, and neither of these entities has to consolidate the crypto assets on their balance sheet.”

March will see three large launches on the platform, with Figment offering two staking funds, for Ethereum and Solana, and Cardano launching an Ethereum strategy featuring downside protection using derivatives.

Issuance.Swiss AG previously worked with the Crypto Finance Asset Management, a subsidiary of Deutsche Borse, with their fund launches.   

Jackson adds that what Apex brings to the offering is the depth and breadth of its corporate and administration services. “We can do this quickly, in six weeks, and inexpensively,” he says. “We have negotiated a series of relationships, and compressed the fee structure, so that our clients, the asset managers, and distributors, could issue a new fund with as little as USD10 million AUM, and still make money. We structured this to enable testing a new market idea and remain in the black.”

“We knew we could compete with US entities pushing passive ETFs, as our clients tend to focus on specific managed strategies, for specific client segments.”

Issuance.Swiss plans another 15 new issues, over the course of the next two to three months. 

If there is another crypto winter, Jackson believes that while the demand will change, there will be no shortage of managers who can create product that protects in down markets.

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