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The rise of cryptocurrency and digital assets poses an urgent question for traditional investors. Should they embrace this new means of trading as a fundamental driver of the future or should they maintain an air of scepticism as volatility in the crypto market continues? Here we take a closer look at the rising use of cryptocurrency among asset managers, what role it can play in different regions and why the use of these new technologies has drawn such a mixed and sometimes outspoken response. Chris Sloley Editor, Citywire Selector
Crypto: The new frontier?
ETPs step up for safety
Exchange traded products are blazing a trail for safer access to crypto markets
An approach to cryptocurrency risk management
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Cryptocurrencies are rapidly gaining acceptance, but regulators are holding back
Pushing for the mainstream
Citywire’s international editors give us the lowdown from their markets
A world’s eye view of crypto
The evolution of crypto
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The genie’s out
Cryptocurrencies are here to stay but they’re not the answer to every investor’s wishes
Crypto’s ascent in emerging markets
The use of cryptocurrency is on the rise in EMs but these markets can be especially volatile
A closer look at social costs
Cryptocurrencies have positives and negatives when it comes to social impact
Crypto’s rise in popularity has brought it much support – and, it seems, just as much resistance. Here, Citywire editors give us a range of perspectives from around the world
Patricia Valle, Editor, Citywire Brasil Here in Brazil, we have some funds and some ETFs that invest directly into crypto markets. There are five crypto ETFs, and one of them ended up as the third biggest fund by flows for ETFs in Brazil last year. Hashdex, the asset manager behind the fund, has grown a lot in Brazil and partnered with American asset manager Victory Capital to launch the first ETF of a basket of cryptos in the US. They are waiting for SEC approval.
It is far better to drive change from the inside by having open and honest conversations with senior management and the board than to walk away and immediately lose any leverage for change
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Being bitconscious: What different markets think of cryptocurrency
Ashley Lowe, Editor, Citywire Canada Canadian asset management firms are taking advantage of increased client demand for crypto and the regulators’ open-minded stance on digital assets. Ontario’s watchdog became the first in the world to approve the launch of a bitcoin ETF through Purpose Investments, and several other industry heavyweights have followed suit. Most recently, CI Global Asset Management launched its third crypto ETF and, shortly after, took a minority stake in a digital asset trading platform. That firm, along with Mackenzie, Fidelity, and Evolve, have all been making moves into cryptocurrency. This is an unexpected trend for Canada, especially considering the volatility of cryptocurrencies. The Canadian market is known to be conservative, and often described as a decade behind the US when it comes to regulatory approval and financial sector innovation. However, those launching funds say these crypto products are filling the gap for investors who are interested in adding digital assets to their portfolios, but hesitant to venture into that world without professional guidance.
Patrick Cairns, Editor, Citywire South Africa In South Africa, many advisers are facing a conundrum over crypto. Some compliance officers have advised that since these assets are unregulated, discussing them with clients at all could be a breach of regulations. Weary of finding themselves in a compliance nightmare, these advisers are avoiding talking about crypto at all, even when the clients bring it up themselves. The risk in this approach is obvious. Whether advisers are involved in the decision or not, people are buying crypto. They may be withdrawing significant amounts of capital from traditional savings vehicles to do so. They may even be putting significant portions of their wealth into these assets. Advisers should be the people moderating this behaviour. But if they won’t talk about crypto at all, their clients are making unguided, and unguarded decisions. It’s a no-win situation for advisers: do they protect their professional standing, without which they can help nobody? Or do they protect their clients and risk the compliance fallout? Until the regulator provides more clarity, it’s a messy, fraught decision.
Camilla Giannoni, Editor, Citywire Switzerland Home to the ‘Crypto Valley’ of Zug, Switzerland is seeing a rise in crypto-related activities. The number of companies specialising in blockchain increased from 919 in mid-2020 to 960 in February 2021, according to PwC in Switzerland and Liechtenstein. Regulation is keeping pace with the industry’s growth. In 2019, the Swiss Financial Market Supervisory Authority licensed two crypto banks: Seba in Zug and Sygnum in Zurich. In 2021 it approved its first Swiss crypto strategy, the Crypto Market Index fund, for qualified investors. Independent asset managers are also increasingly interested in this industry. In 2021, Belvoir Capital launched a decentralised finance income strategy, and VZ VermögensZentrum announced a partnership with Sygnum to offer the bank’s digital asset services to its clients. But it is not just wealth managers who are drawn to crypto – some cantonal banks are too. At the end of 2021, Aurélien Michaud, head of markets at Banque Cantonale du Jura, said: ‘At the end of last year we started to have a small pocket of allocation to cryptocurrencies, which is roughly 1.5% in clients’ portfolios. We think it is a good way of optimising the risk-return profile of the portfolio.’
Cryptocurrency has become the elephant in the room for financial markets. There are those who have embraced its long-term potential, and others who remain hardline sceptics. But is there a general consensus on the prospects of crypto? A group of Citywire’s international editors share their views on what has unfolded in their respective markets, how their readers are responding and what common threads can be found.
Chris Sloley, Editor, Citywire Selector (Europe - fund buyers) The pan-European view is mixed. German fund buyer Thomas Romig previously said investing in bitcoin is no more scientific than betting on professional football, while Finland-based Toni Iioven raised concerns about both the ethics and security around the concept of cryptocurrency. But, still they come. Many firms are testing the water with crypto products, while others are looking at crypto infrastructure or just semi-related areas, such as companies operating in wider areas of fintech which are promoted as being linked to the crypto boom. A private banking chief I spoke to said the question is becoming more common among both clients and his own advisers, but there is a sense it is a ‘new and shiny’ idea that could come unstuck. ‘With everyone and their mother looking into crypto, it is hard not to have a view but if you do have one, I would suggest being agnostic,’ he said.
Charles Walmsley, Editor, New Model Adviser (UK - IFAs) If you want an insight into the rise of crypto investing in the UK, just turn on Match of the Day on a Saturday evening. Barely a minute goes by on the BBC’s weekly Premier League highlights show without some form of cryptocurrency being promoted on players’ shirts or advertising hoardings around stadiums. Check out any football star’s social media accounts and there is a good chance you will find links to non-fungible tokens. Even those who do not follow the national game will see adverts promising great returns and commission-free trades on public transport. It is no wonder, then, that financial advisers are seeing more demand for crypto investments from clients. Plenty have told Citywire New Model Adviser that more and more clients want to put their money into things like bitcoin and bored apes. Few are happy to recommend such volatile investments though. ‘Cryptocurrency is hard to ignore as an asset class, but we’re going to have to because we’re not authorised to advise about it,’ Karen Barwick, an adviser based in Newcastle, recently told us. ‘We do have clients who hold it alongside their portfolios, but it frightens me to death, to be honest.’ UK regulator, the Financial Conduct Authority, has also started to clamp down on promotions. Tougher rules are due to come into place soon that will ban new joiner bonuses that are designed to attract new customers, and impose much tougher requirements on risk warnings in these investments. Whether this will be enough to stem the tide of interest remains to be seen. Premier League clubs will soon be looking for new income streams as the government considers banning adverts from gambling companies. Some have suggested that cryptocurrency will seamlessly fill that gap, perhaps appropriately given the speculative nature of the asset.
Selin Bucak, alternatives correspondent (Turkey) Turkey is going through one of its worst economic periods in recent history, with its currency swinging wildly and inflation reaching new heights, exacerbated by the president’s unusual economic policies, which include blaming high interest rates for rising inflation. Inflation was reported to be nearly 50% by state sources, but according to the independent Inflation Research Group, it is already north of 114%. There has been a significant loss of confidence in the government’s ability to manage the country’s economy and the consistent volatility of the lira – the worst-performing currency in the emerging markets in 2021 – has pushed many to keep their savings in international currencies, gold or even cryptocurrencies – which are viewed as less volatile than the lira. According to a report from Chainalysis, Turkey had by far the highest transaction volume in the region at $132.4bn between July 2020 and June 2021. One exchange, Paribu, where Turks can use their bank accounts to buy and sell crypto in Turkish lira, has grown its user base from 1.5m to 5m over the 12 months in 2021, with average daily trading volume reaching $500m by the end of the year. In addition to Paribu, BTCTurk is a popular exchange, while Binance and Coinbase also have operations in the country. But the rising interest in crypto has brought with it government scrutiny as well as potentially fraudulent behaviour. Last year two crypto exchanges collapsed, Vebitcoin and Thodex. The former’s chief executive was detained, while the founder of Thodex fled the country with some saying the users’ losses could be as high as $2bn. The Turkish Central Bank banned the use of crypto currencies as a form of payment from 30 April 2021. It is legal to hold the asset, but legislation to regulate exchanges has been submitted to the parliament.
Tabea Schulz, Editor, Citywire Deutschland There is the optimistic pro-crypto side and the absolute pessimistic one – it feels like there are very few people in between who don’t know what to think of it. It seems like an emotional topic, too. You don’t get the German deliberate yes or no. It is mostly a ‘crypto is the future’ or ‘crypto is nonsense’. Some of the negative arguments are around the mistrust of the technical side and the idea that crypto might not meet ESG regulations. ‘It is just a temporary trend,’ is a regular refrain. Our poll on crypto being the new gold got a lot of responses but ended 50% yes and 50% no. In addition, it seems like a fight between generations, as many younger investors or managers think positively about crypto, while older ones are more negative.
Maddalena Liccione, Editor, Citywire Espana In Spain, the interest shown by investors is increasingly growing. According to a study by eToro and EFPA Spain, Spanish investors in crypto assets have risen from 9% to 33% in one year. A survey by WisdomTree showed that nine out of 10 Spanish financial advisers have spoken to clients about investing in cryptocurrencies. However, the complexity of cryptocurrencies and the lack of regulation surrounding this type of investment have led supervisors to issue severe warnings about investment by non-professional investors. The CNMV and the Bank of Spain have warned of the ‘extreme volatility, complexity and lack of transparency’ of cryptocurrencies. A few days ago, the CNMV published the first European circular regulating the advertising of cryptocurrencies. There is a hedge fund with Spanish capital, Protein Capital, registered in Luxembourg, which invests in crypto and it is only for professional investors.
Dylan Lobo, Editor, Citywire Wealth Manager (UK - wealth managers) Bitcoin? Thanks, but no chance. You would have to hunt far and wide to find a UK wealth manager (who admits) to being a bitcoin bull. Yet they are not exactly ignoring it; they all have a view. Their kids and their clients’ kids all seem to be talking about it, so it requires some articulation and whatever understanding they can muster to rationalise the ills of crypto, especially as the next generation works its way through the client pecking order. A survey held at a Citywire Wealth Manager event in London last autumn offered a good sense of what the professional community thinks. One in five delegates admitted to being at least crypto curious and would consider buying a regulated product based on real or synthetic exposure. Around 10% said they still need convincing, but the overwhelming majority said there was ‘no chance’ they’d be investing in crypto anytime soon. The minority who may have considered investing in crypto last autumn may have been dissuaded by the regulatory clampdown seen this year, which included banning misleading promotion, wherein lies the major issue. The market remains largely unregulated to the level required for significant allocation by investment managers. The risk of investing in something that is going to be hit hard with a regulatory hammer in the future creates the prospect of major reputational damage. Once the regulatory picture clears, this may change, but with the FCA itself grappling with how to police this wild market, we expect that picture to remain murky for the foreseeable future. A wealth manager I was speaking to recently is perhaps a good barometer of the wider sentiment right now. ‘The likes of bitcoin and ethereum is a currency for criminals. These are also geared plays on liquidity. I think that bitcoin goes to zero at some point,’ he said.
Jeremy Gordon, Editor, Citywire Funds Insider (UK - retail) Among retail investors in the UK, crypto remains the preserve of millennials and Gen Z but the sheer level of interest makes it hard to dismiss. A recent Boring Money survey found 12% of those under 45 own crypto assets, double a year ago. There is some interest in long-term shifts for money and payments, but the clear draw remains the massive price spikes for bitcoin et al – first in late 2017 and then during the pandemic. Anecdotally, many people aged 30 and under know of someone who’s made a comical amount of money from crypto (perhaps enough for a deposit on a house). Whether they’ve actually held onto that is another matter. For most, these ‘investments’ are just dabbling, but I can’t see that popular upswing just ebbing away short of a total clampdown by regulators. Obviously, giant financial institutions are also muscling in, with all the accompanying analyst chatter about correlation to other assets and so forth. For me, that misses some of the point. When my stepmother is also asking if she should buy bitcoin, something else is going on.
This might be the opportunity to reset and make the kind of intuitional changes and policy choices that will lead to a better, greener and more sustainable future
Audrey Ryan Support manager, Aegon Global Sustainable Equity Fund
Aegon Global Sustainability Equity Fund
Bitcoin and more generally digital assets have increasingly gained traction over the past years, attracting investors’ attention. Today, everywhere you look, you see traditional investment firms starting to dabble with crypto, from small family offices to the largest banks in the world. This takes various forms, with some just starting to get educated on the topic, while others are already heavily invested and involved in the space. The rationale for investing varies greatly from one digital asset to the next, as their characteristics and features make them very different from one another. But one thing they pretty much all share (baring stablecoins), is their high return volatility. As a new asset class, macro and idiosyncratic developments can create wide swings in the price of digital assets. To assess coin-specific risk, investors should consider a wide range of elements when investing in a particular digital asset, including assessing the particular digital asset’s own development team, the use cases and certain regulatory risks. Does it appear that the development team is strong and committed or is it probable that they will just senselessly burn the proceeds of their token sale? Is there an actual use case giving value to a coin, or is it purely a speculative instrument? Would it be considered a commodity or a security by regulators? These are all important questions that can shed light on the risks of investing in a particular coin. One obvious way to manage idiosyncratic risk (i.e. specific to the digital asset or coin itself) is diversification. Investing in a range of digital assets reduces the risk of seeing your portfolio significantly impacted by an event affecting one particular coin or token. Ripple, for example, experienced a dramatic price drop in December 2020 as the SEC initiated a probe into Ripple’s token sale. But this event barely affected the rest of the market, so investors holding multiple tokens in addition to Ripple would not have felt the blow too strongly. When it comes to systematic risk and the volatility of the overall asset class, investors should consider digital assets in the context of their overall portfolio. If digital assets are very volatile, they also have a low correlation to other asset classes. Appropriately sized, the impact of adding digital assets into a broader multi-asset portfolio can be surprisingly contained. Our analysis indicates that between the 31st December 2013 and the 31st December 2021, a 2% allocation to bitcoin within an example global 60/40 equity/bond portfolio[2] with quarterly rebalance would have resulted in a 0.6% increase in portfolio volatility, from 8.9% to 9.5%, delivering a return of 9.2% for the bitcoin portfolio vs. 7.1% for the 60/40 portfolio. Adding bitcoin to the example 60/40 equity/bond portfolio increased the Sharpe ratio[3] from 0.71 to 0.90. To give some perspective, the MSCI ACWI[4] returned 10.0% with volatility of 13.6% over the same period[5], i.e. a Sharpe ratio of 0.68. One of the ways investors can approach digital assets allocation while controlling for risk is by utilising risk-based frameworks, such as target risk contribution. By allocating a risk budget to digital assets, investors can optimise portfolios in an effort to keep the contribution of digital assets to the risk of the overall portfolio in check. There is no denying that digital assets are a new and risky asset class, and that assessing such risk is a challenge. But this should not necessarily put investors off. Considered within the context of a broad portfolio, appropriately sized allocations have the potential to improve the risk-adjusted profile of the portfolio. This reason, along with the potential of the blockchain technology behind digital assets, means digital assets deserve to be considered for inclusion in multi-asset portfolios, just as other asset classes are. To find out more visit our Crypto Insight Centre. [1] Starting end of 2013, Bitcoin's annualised performance as of end of 2021 is 62.8% Starting end of 2016: 106.8% Starting end of 2018: 113.9% [2] 2% in bitcoin, 58% in the MSCI ACWI, and 40% in the Bloomberg Barclays Multiverse. From 31 December 2013 to 31 December 2021. [3] Sharpe ratio refers to a financial metric often used by investors when assessing the performance of investment management products [4] MSCI ACWI refers to the MSCI All Companies World Index [5] From 31 December 2013 to 31 December 2021.
This material is prepared by WisdomTree and its affiliates and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date of production and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by WisdomTree, nor any affiliate, nor any of their officers, employees or agents. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of future performance.
Florian Ginez Associate Director, Quantitative Research, WisdomTree
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An approach to cryptocurrency risk management [1]
The ethical investor
The moderate investor
The active investor
The innovative investor
If your client wants their investment portfolio to reflect their strongly held values and beliefs, consider ethical or values-based investing. Some of these funds were originally faith-based and have their roots in religious movements. Others are broader. They will typically use negative screening to remove companies in industries that might be viewed as objectionable from an ethical or moral perspective. They might screen out companies associated with alcohol, tobacco, gambling, pornography, animal testing, weapons and nuclear power, for example. This type of investing is typically quite personalised, as everyone’s moral compass is calibrated differently. What is acceptable to one investor might not be to another.
If your client requires their investments to stick closely to traditional benchmarks but they are happy to screen out the most unsustainable companies, consider an ‘ESG lite’ approach. By investing in the world’s largest companies, there will be some compromises on ESG issues. These companies will not score highly on every factor, although there is a great deal changing, especially since the pandemic. A moderate approach uses negative screening to avoid companies with the lowest ESG scores. This strategy lends itself to investing in less expensive ESG-themed ETFs and index trackers.
If your client wants to choose companies that rank as the most sustainable according to ESG metrics, as opposed to excluding the ones that rank lowest, positive screening could be the best approach. ESG strategies using positive screening seek out companies that are the best in class and score highly on a range of different ESG metrics, including environmental impact, treatment of workers and business ethics. They also use negative screening to exclude companies with the lowest ESG scoring from their investment universe.
If your client wants their investments to support companies creating solutions to world problems, impact investing could be the strategy to follow. The aim of impact investing is to make a positive and measurable impact on society or the environment, as well as generating a financial return. Some impact investing focuses on funding specific projects, such as microfinance funds to create affordable housing, or green bonds to raise money for a clean water initiative. This may mean the portfolio is more concentrated, and there is a good chance it is riskier too. Investors in this space need to be willing to accept more risk and less diversification.
Crypto: From cypherpunk idea to mainstream asset
Peter Habermacher, Aaro Capital
Charlie Morris, ByteTree
‘Crypto was originally a cypherpunk anarchist movement which was very much anti-establishment and aiming to revolutionise the world’
‘People assume that a bitcoin has a serial number on it, but instead it has a provenance. Anytime you transact, you’re changing its identity effectively’
According to Duong, the crypto community is a bottom-up movement of tinkerers united in their campaign against incumbent behemoths, which feels like something we’ve seen before. ‘The crypto community and the reactions against centralised institutions are potentially comparable to the reactions of early Apple computer users against “Big Blue” – IBM’, he said. Crypto is a social trigger for investors, claims Duong. It creates a battleground where everyone is driven by the objective to eliminate the existing inefficiencies or inequalities. ‘The target picture is relatively straightforward, but there is still an argument about the right way to get there and what compromises to make. We must not forget that crypto has not reached the stage of maturity and is only at the beginning of its journey.’ More analysis needed Crypto takes money into a whole new direction, liberating it, according to Charlie Morris, founder of ByteTree Asset Management.
Morris was working as head of absolute return for HSBC when the concept of crypto first piqued his interest in 2013. ‘My initial reaction was to build some analysis around it, so I started a research site in 2015 and the asset management company was launched in 2020,’ he said. The best thing to happen to crypto was the value of the asset skyrocketing, which rushed it into the spotlight. ‘I think there has also been an increased respect [of crypto] because it blew up so many times and then came back,’ Morris added. And yet, the financial UK regulator’s ban on crypto from the fund management industry has made it a pariah among financial assets, resulting in crypto-related stocks being the only viable option for investors. But, responding to concerns about the absence of regulation in crypto, Morris said we should remember that cryptocurrency is not digital money that can be easily cut and pasted. ‘People assume that a bitcoin has a serial number on it, but instead it has a provenance. Anytime you transact, you’re changing its identity effectively.’
More and more companies are waking up to the prospects of crypto, but government regulators refuse to open the floodgates just yet Crypto has proven more polarising than other asset classes in the financial space. But what exactly triggered such an emotional response to the new economic model? Many top-tier institutions have already invested in the crypto asset market, adding liquidity and helping to institutionalise the sector. ‘Established companies ranging from Amazon to JP Morgan to Paypal are embracing this new technology,’ said Peter Habermacher, CEO of Aaro Capital. ‘And nearly 90% of institutional investors are now finding something appealing about them.’ His firm – established in 2018 as one of the first institutional quality investment specialists in the space – takes a strong stance on distributed ledger technology, including crypto. ‘Crypto was originally a cypherpunk anarchist movement which was very much anti-establishment and aiming to revolutionise the world,’ he said. ‘It was largely born in the depths of the 2008 financial crisis as an alternative to the global financial system, which was, at that point in time, heavily imploding,’ he said. BIT Capital’s director of crypto strategies, Ha Duong, echoes these views. ‘It can be seen as a cultural movement against the increasing financialisation of the economy and the concentration and corruption of power by centralised institutions,’ he said. The strong emotional response to crypto is, however, explained by a set of other factors, according to Habermacher. Guided by emotion On one side crypto assets have been the fastest-growing, highest-returning asset class on both an absolute and risk-adjusted basis. However, an increasing number of institutional investors who embraced such growth opportunities – particularly in the US – also had to face high volatility, and a high risk/reward scenario. ‘This can be seen particularly through the phenomenon of fierce competition and tribality between crypto communities – for example on Twitter, which is traditionally confined to the founding team and key equity holders of companies,’ said Habermacher.
Federica Tedeschi Reporter
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Crypto ETPs are the new kids in town, branded as bringing safer exposure to the market, and while lack of unified regulation remains, issuers are already thinking a step ahead High volatility and lack of regulation have put many fund management firms off cryptocurrencies but providers are starting to address these concerns by offering exposure via regulated exchanges. A prime example are crypto exchange-traded products (ETPs). ‘Last year was really about providers seeking to be the first ones launching something new. It was a race to become the main issuer in the space,’ said Roxane Sanguinetti, head of strategy at market maker and liquidity provider GHCO. ‘I think they’re not done racing, because there’s not a clear winner at this point,’ Sanguinetti said. ETPs started flourishing around 2020, just as the market was addressing the widening impact of the pandemic. Bradley Duke, co-CEO of issuer ETC Group, said the firm first had the idea to release a crypto ETP in 2018. At that time there were two similar products on the market from US firm Grayscale Investments and Swedish company XBT Provider. ETC later released its first crypto ETP in June 2020 tracking bitcoin. ‘We wanted to make sure that the product was a very good access vehicle for investors who either couldn’t or didn’t want to go through the trouble of investing directly in crypto themselves,’ Duke said.
Duke acknowledges many people compare the crypto market to the Wild West but crypto ETPs seek to offer exposure in a safer environment. ‘It’s a regulated product, on a regulated exchange, through a regulated broker,’ said Hector McNeil, co-CEO of ETF provider HanETF. ‘And if you’re a retail investor, what’s great about that is that there is a duty of suitability. So, they can’t give you access to products they don’t think are suitable for your level of experience or knowledge,’ he said. Duke said that, for now, those entering the crypto space in this way include private banks, family offices and small hedge funds, as well as more specialised players involved in sophisticated trades. Rahul Bhushan, co-founder of Rize ETF, said his firm has a positive outlook on crypto ETPs. ‘We feel, however, that the physical crypto ETC [exchange-traded commodity] market tracking single cryptocurrencies will quickly become saturated, with key differentiators being custody and fees, certainly for the more mainstream exposures.’ Bhushan also noted the fast-growing crypto ecosystem on top of outright cryptocurrency exposures, mainly in the form of companies providing crypto-related products and services from exchanges/custodians. ‘The majority of these companies, however, are currently crypto miners and these are the same companies that make up the bulk of the portfolios of most blockchain ETFs. This isn’t how we would necessarily play this space and we are much more interested in those building crypto financial services,’ he said.
‘It’s a regulated product, on a regulated exchange, through a regulated broker’
Volatility: The main hurdle before bigger players come in While ETPs are a regulated form of exposure to crypto assets, bigger players will be looking for something more. ‘There is no regulated player that can really cater to these big institutions yet, so crypto ETPs are the only way they can invest in the underlying market in a secure way and through their regular channels,’ said Sanguinetti. ‘It’s the easiest, and for now, the only way that these big players can get in the space.’ Sanguinetti said issuers are now engaging with institutional firms, but she believes these conversations will continue for some time yet because of persistent volatility. ‘It’s still too high for a pension fund. They can’t stomach a drop of 20% a day or 50% increase. There needs to be a change in volatility for these bigger players to access the markets. But it will unlock at some point.’ She said that as the uses for cryptocurrencies’ underlying technology multiply, the less pronounced the volatility will be.
‘There is no regulated player that can really cater to these big institutions yet, so crypto ETPs are the only way they can invest in the underlying market in a secure way and through their regular channels’
Hector McNeil, HanETF
Roxane Sanguinetti, GHCO
The next race in the crypto space: ETPs
‘There will be a value anchored within each coin. Ethereum is the best-case scenario for now, and we are really starting to see it. The volatility pattern of bitcoin and ethereum is starting to look a lot more like a risky equity,’ Sanguinetti said. ‘It will slowly find its value range, like commodities do. But that can only come with more people holding the assets and being involved in the markets in general.’ She believes this year will see a shift in mentality in terms of releasing new products, as issuers have already put out many ETPs tracking single coins. The focus now is on releasing more innovative ideas, especially involving baskets of assets. ‘We’re seeing the combination of crypto with more traditional assets, which could help balancing in terms of volatility, and offering a more diversified approach from the get-go.’ Regulation: Every state for itself For now, there is no unified regulation on these assets, and every country has its own set of rules. In Bhushan’s view, ETPs would support liquidity and help legitimise cryptos as an asset class with investors, and over time, these products would help dissolve the regulatory guardrails. ‘However, we would distinguish this from adoption. ETPs or no ETPs, we would argue, have little bearing on the growth of crypto and the ecosystem.
‘That is to say, we believe there is going to be value in having a parallel financial ecosystem that serves a decentralised, self-governing and consumer-serving purpose regardless of there being any ETPs available or not,’ Bhushan said. In terms of regulation, HanETF’s McNeil believes the US is catching up with Europe. ‘The only thing they do allow is one that uses derivatives like futures. You’re living off the price, but you’re not in the demand story,’ McNeil said. Countries such as Denmark, the UK and Spain allow bitcoin to be used in transactions and have developed forms of regulation. In Germany, cryptocurrencies are considered private money, and while it is not legal tender, individual transactions are tax-free under a certain amount. ‘I don’t think there’s going to be [wider regulation in the US] anytime soon. There’s always something that stops taking that extra step. I think we’re still years away from seeing anywhere close to the same products happening in the US versus here,’ he said.
Daniel Ruiz Investment Reporter
Jason Guthrie, WisdomTree
‘If you think about disintermediation of major players, increases in efficiency and moving to real-time interactions, it’s not difficult to see the benefits’
The rise of digital assets looks unstoppable and many investors are scrambling for a piece of the action, but not everyone is convinced An increasing number of financial services companies are exploring cryptocurrency opportunities, but what are their long-term plans? Cryptocurrency and blockchain are going to affect the world of finance the same way the internet shook up the media, according to Jason Guthrie, head of digital assets at WisdomTree. Guthrie said financial services will soon see a major reorganisation around the new technology. ‘If you think about disintermediation of major players, increases in efficiency and moving to real-time interactions, it’s not difficult to see the benefits,’ he said. The US asset manager launched three cryptocurrency exchange-traded products (ETPs) last November in a bid to capitalise on transformative and disruptive technology. And, they were not alone. Launch pad In the same quarter, Berlin-based boutique BIT Capital launched the BIT Global Crypto Leaders and BIT Crypto Opportunities funds, which focus on cryptocurrencies and listed companies operating in the blockchain and crypto sector. The funds are among the first German institutional-grade products that allow various types of investors, from private individuals to large and regulated institutions, to access the crypto space, according to the funds’ manager Jan Beckers. They invest indirectly in cryptocurrencies through ETPs to avoid the operational complexity of private keys and wallets; in this way BIT Capital can lower the entry barriers for the emerging asset class. BIT Global has operated in the crypto space since 2015, due to the attractive risk-adjusted return potential offered over the long term. ‘With crypto, the genie is out of the bottle. Last year, we saw that a variety of individual investors and corporates have opened to the crypto industry, and we expect to see an evolution like tech stocks 10-15 years ago,’ Citywire AAA-rated Beckers said. There are an increasing number of listed crypto stock investments, as well as companies in the private markets which expect to go public in a few years. ‘The fundamental technological principles behind crypto can also enable new types of financial instruments and market structures with broader impacts on the financial sector,’ Beckers said. The European market is growing, but the US market is already big. Here banking giants have made huge strides. BNY Mellon, for example, became the first global bank to announce an enterprise digital assets unit in February 2021. In addition, it is providing fund services for digital asset-linked products, including those from Grayscale Investments, the world’s largest digital asset manager. It is also making a series C investment in Fireblocks, a platform that allows banks and other financial institutions to store, move and issue cryptocurrencies. BNY Mellon is now in the process of developing and testing its digital asset custody prototype slated for launch later this year, pending regulatory approval. Where in the world? The geographical exposure of cryptocurrency goes well beyond Europe and the US, though. Japanese group Nomura appointed Robyn Friedman as head of blockchain within the wholesale digital office at the beginning of 2021. Asia is definitely picking up speed when it comes to crypto. ‘Both Singapore’s sovereign wealth funds, Temasek and the Government of Singapore Investment Corporation, invest in the crypto exchange Binance and crypto custodian Anchorage, respectively,’ Beckers said. It would appear other sovereign players are also growing in confidence when it comes to crypto. Beckers added: ‘Norway’s oil fund is exposed to crypto through MicroStrategy, while UAE sovereign investor Mubadala is looking to invest in crypto. There are also rumours that sovereign wealth fund Temasek may have already invested in bitcoin.’ With the prospect of more countries adopting cryptocurrency as legal tender after the adoption of bitcoin from El Salvador last September, Beckers said it could start a wider trend. ‘We would not be surprised if more countries adopt crypto in the next three to five years, especially low-income and emerging market countries. Most do not have access to a reliable banking system, and larger parts of the population are excluded from various financial services. ‘In the end, crypto can have a more profound adoption curve in those places that are catching up with the increasing strength of local demand,’ he said.
‘The genie’s out of the bottle’
Questioning crypto: a selector view Fund selector Toni Iivonen is among those who are more sceptical. The Helsinki-based investor does not invest in cryptocurrency due to concerns around security and ethical issues, as well as doubts around the volatility of such assets. Iivonen, who is chief investment officer at Elite Alfred Berg, said the financial and IT sectors will be crucial to the success of crypto stocks. ‘JP Morgan has publicly endorsed the adoption of crypto in its banking business and could take advantage of its reputation to easily reach its clients. ‘Exchange platforms such as CME Group are exploring the crypto world and could eat up the market share of crypto exchanges such as Coinbase. In the information technology world Meta is already developing its own cryptocurrency,’ he said. Iivonen doesn’t rule out investing in cryptocurrency in the future, but said long-term winners will employ blockchain technology as part of their business.
Some emerging market investors are seeing opportunities develop in crypto, but others warn that volatility risks are more severe in weaker economies Concerns that Russians are using cryptocurrency to bypass Western sanctions has prompted US regulators to propose a bill that can block transactions with Russian crypto addresses. But this may inadvertently lead other emerging markets to reject internationally traded cryptocurrencies and develop their own exchanges. This is according to Citywire A-rated Dominic Bokor-Ingram from Fiera Capital, who believes that emerging markets are alarmed over the sanctioning powers of the West. ‘Countries are keen to control their money supply. They'll be much keener to have it out of the reach of anyone else going forward,’ Bokor-Ingram said. Similarly, Mark Mobius of Mobius Capital Partners said cryptocurrency operations are most common in those emerging markets that are facing restrictions by the US, such as Venezuela. ‘Cryptocurrencies are used in Sub-Saharan Africa, Latin America, Asia – all over the world. There’s no question about that,’ Mobius added. While India is attempting to ban crypto, UAE is a country currently trying to establish itself as an alternative crypto hub to the US, Bokor-Ingram said.
‘UAE is creating the domestic conditions for crypto exchanges; a legal framework, the right technology, the right bandwidth, and so forth.’ Investors can’t invest directly in cryptocurrency, but this regional development might open up other opportunities in mining companies and crypto exchanges in emerging markets. Dipping the toes 'Crypto is as relevant to emerging markets as it is to the West,’ said Bokor-Ingram, adding that emerging markets could even have advantages over the latter. ‘Emerging markets have a lot of cheap, stranded power, and a lot of emerging markets also have very sophisticated tech sectors. Combining the two together makes a very interesting investment opportunity.’ There are currently no listed crypto miners or exchanges that meet Bokor-Ingram’s investment criteria and there are a number of barriers he has recognised. One of the challenges at play is that cheap hydropower, the ultimate energy source for crypto mining, is hard to come by in emerging markets, and there is also a shortage of the huge number of chips needed to create a decent-sized mining company. ‘It’s not investable at the moment, but this might change as some companies in some regions are preparing to launch an IPO. ‘We might find in the next year that the first crypto exchange will list on the UAE Stock Exchange. And if that happened, we would be interested,’ said Bokor-Ingram. He wouldn’t be the only one. Mobius has noticed that a lot of emerging market investors are flirting with the investment.
‘Emerging markets have a lot of cheap, stranded power and very sophisticated tech sectors. Combining the two together makes a very interesting investment opportunity’
‘Most of them have put their toe in the water by buying cryptocurrency exchanges. That’s how people are able to get exposure without going directly into the coins,’ Mobius said. However, he retains his position as a well-known crypto critic. ‘I realise a lot of people have faith in these cryptocurrencies. And that’s fine. There’s nothing wrong with that and hey, some people have made good money. But for someone like me and the clients I serve, it’s very difficult to justify it as a long-term investment.’ The sovereign risk element One emerging market that has gone full speed into crypto is El Salvador. When the country became the first in the world to adopt bitcoin as a legal tender in September 2021, it amassed as much protests from locals as it did praise from cryptocurrency enthusiasts. Six months into the experiment, however, the uptake has been slow.
‘Most EMs have put their toe in the water by buying cryptocurrency exchanges. That’s how people are able to get exposure without going directly into the coins’
Dominic Bokor-Ingram, Fiera Capital
Mark Mobius, Mobius Capital Partners
How US crypto-crackdowns could fuel an EM bitcoin boom
‘The government’s claim that this is an exciting new project bringing El Salvadorians into the financial system doesn’t hold up,’ said Graham Stock, an EM sovereign debt strategist at BlueBay, who recently came back from a research trip to the country. ‘In practice, people sign up for the digital wallet, convert the $30 bitcoin into $30, withdraw it and delete the app,’ he said. Mobius, pointing to the high turnover in bitcoin, agrees: ‘For anybody with cryptocurrency, the first step is to try and get US dollars.’ Several people told Stock they did not consider bitcoin a good storage of wealth due to its value fluctuations, or because they don’t trust the government enough. There’s also the fact that El Salvador’s other official currency is the US dollar, which locals regard as more reliable. El Salvador had tabled plans to roll out a $1bn bitcoin bond, which have now been postponed to later in the year. Half of the proceeds will go to develop mining infrastructure and half will be invested in bitcoin to generate excess return on the bonds. However, Stock is not expecting it to end up in any of BlueBay’s portfolios. ‘If there was an exchange or a crypto mining company and we were confident about the business model, then that’s a possible investment opportunity. ‘But because of the bitcoin exposure built into the bond, it’s not something that we would look at. And I’m not sure the retail investors who might look at this fully understand the sovereign risk element. ‘It’s not just a bitcoin investment. It’s also at the very highest risk level in emerging markets,’ Stock said.
Siri Christiansen Reporter, Citywire Selector
The social costs of cryptocurrency
Margaryta Kirakosian Deputy Editor
Out of all 124 strategies identified by Morningstar, only the following two were identified as having direct links to sustainability in their names, see table below.
Cryptocurrencies have drawn a lot of criticism for the potential environmental damage they cause but sustainable investors will also be looking at their social impact, and it’s not all bad Cryptocurrencies remain a contentious topic among professional investors but debates grow even more heated when the topic of sustainability is mixed in. Many commentators have highlighted how energy-intensive bitcoin mining poses environmental challenges but few have touched on its social impact. Decentralised ledger systems have the advantage of anonymity and security but these qualities can also provide the perfect cover for a range of criminal activities. According to data from law firm Pinsent Masons, crypto investment fraud in the UK, for example, increased by 64% in 2021, reaching 9,458. Software company Chainalysis identified that crime involving cryptocurrencies hit an all-time high of $14bn (€12.6bn) last year, while crypto received by digital wallet addresses linked to activities such as scams, darknet markets and ransomware jumped by 80%. Russia’s invasion of Ukraine has added more controversy to the mix as both populations have searched for ways to disconnect themselves from devalued local currencies, raising concerns that cryptocurrencies have the potential to take the sting out of sanctions. Searching for sustainable funds No matter how you look at cryptocurrencies, investors will be hard pressed to find existing funds in this market that meet sustainable criteria. Morningstar currently has no specific category for crypto funds, but when Citywire approached the research company for data, it ran a search using keywords which identified 124 strategies. The following 10 funds are the biggest on the list and none of them have ‘sustainability’ or ‘ESG’ in their names:
Martin Vezer, manager covering thematic research at Sustainalytics, said the team’s model blockchain portfolio is showing higher risk on the issues of human capital and business ethics in large part because of its allocation to the information technology and financials sectors. Both are highly exposed to data privacy and security risks because they collect and store a vast amount of sensitive information, such as customer data and financial records. ‘In our analysis of 46 financials companies that are included in our blockchain model portfolio, we found that 19 of these companies have experienced significant to severe business ethics controversies over the past three years,’ Vezer said. Things can improve, however, and active management has a role to play in pushing up the ESG profiles of crypto funds. Vezer said active managers developing a blockchain thesis can engage with companies to promote more clarity in disclosures about cybersecurity, their programmes to adapt to technological change and their plans for attracting and retaining specialised developers and data security experts. ‘They can also respond dynamically to current events, such as company controversies,’ he added. ‘Passive strategies can also incorporate ESG considerations, such as screening a blockchain index for company involvement in severe business ethics incidents.’ Vezer said investors exploring the blockchain fund market can investigate the approach of a fund’s management team to see whether they have a strategy for addressing ESG risks and can also assess the ESG performance of the issuers that are included in a given fund.
Given this data, there aren’t likely to be many crypto funds that fall within sustainable regulations such as Europe’s Sustainable Finance Disclosure Regulation, but industry experts are not so pessimistic. Charlie Morris, founder of ByteTree, said the Article 8 category, which promotes environmental and social characteristics, is not too difficult to comply with, assuming tech and computing in general seem to qualify. Meanwhile, Article 9 would need either a focus on proof of stake or an offset of some sort. Will Wilson, climate lead at Apex Group, can also see crypto funds having their own niche within sustainable fund frameworks. ‘If they clearly articulate how the benefits are achieved, back the claims up with accurate data and, for example, use renewable energy and carbon offsetting in order to minimise environmental impact then they could be consistent with the requirements of the regulation,’ he said. Tackling ESG issues When assessing the sustainability of various crypto funds it is key to take a closer look at their specific components. The Sustainalytics team did this when they built a model portfolio consisting of 10 blockchain-themed ETFs and compared it with the Morningstar Global Markets Large-Mid Cap index. The weighted material ESG issue risk scores of the fund of funds were 17% higher on human capital and 71% higher on data privacy and security.
BIGGEST CRYPTO FUNDS BY AUM
Will Wilson, Apex Group
‘If they clearly articulate how the benefits are achieved, back the claims up with accurate data and, for example, use renewable energy and carbon offsetting in order to minimise environmental impact, then they could be consistent with the requirements of the regulation’
CRYPTO FUNDS WITH DIRECT LINKS TO SUSTAINABILITY IN THEIR NAMES
Martin Vezer, Sustainalytics
‘In our analysis of 46 financials companies that are included in our blockchain model portfolio, we found that 19 of these companies have experienced significant to severe business ethics controversies over the past three years’
Forensic look It is easy to poke holes in cryptocurrencies’ sustainability credentials, but the technology is not without its bright spots even on the social side of the ESG acronym. ByteTree’s Morris said similar social concerns were voiced about the internet in the 90s. ‘The network is a technology which is neutral, rather like the dollar. It is the bad actors that need to be held to account. ‘The same approach should be taken as with traditional financial crime. Blockchains are rich in data and leave a trail. Best to avoid crypto for crime as the tracking systems are highly sophisticated.’ Benjamin Dean, director of digital assets at WisdomTree, said blockchains are open source, distributed databases that anyone can see and investigate, which makes them a poor way to launder money. He suggested investors can address the criminal issue through the use of blockchain forensics companies, which track transactions from accounts known to have been associated with criminal activity in the past. ‘Indeed, these companies’ services are used by all major custodians and exchanges for compliance and know-your-customer/anti-money laundering (AML) at present,’ Dean added. In the ideal world, the transparency of the blockchain should enhance the ability to see where and from whom money has flown. ‘It is then up to those trading to do the necessary AML and due diligence checks on the traders identifiable on the blockchain and flag any concerns both internally and externally,’ Apex’s Wilson said. In his view by removing the need for brokers and broadening access to investing, the ledger and blockchain enhances transparency. ‘The technology could also help auditing carbon credit retirements or following capital flows for charitable donations among other things,’ he said.
Clean versus dirty energy
The what, where and how of impact investing
sponsored by Wellington Management
Greenflation: a fair cost or an obstacle?
sponsored by Candriam
The challenge for asset managers in the climate crisis
sponsored by Axa Investment Managers
Beyond SFDR: Understanding the ESG credentials of Article 8 and 9 portfolios
sponsored by AllianceBernstein
Selector perspectives on sustainability
Paying attention to human capital
Do gas and nuclear power deserve a sustainable badge?
Red flags on green bond labels
Venture capital roadblocks on ESG
Wellington’s impact portfolio managers, Campe Goodman and Tara Stilwell, answer essential questions on impact investing and how to access it. What is impact investing? Impact investing provides funding to companies and bond issuers actively addressing the world’s major social or environmental challenges. Impact investors like us intentionally direct capital with the aim of generating positive outcomes for people and the planet while seeking to deliver competitive investment returns. Where do you find impact investment opportunities? We focus our research on 11 impact themes, centred on life essentials, human empowerment and the environment. Life essentials covers affordable housing, clean water and sanitation, health and sustainable agriculture. Human empowerment seeks to address the digital divide, education and job training and financial inclusion as well as safety and security. The environmental category encompasses alternative energy, resource efficiency and resource stewardship. How do you define a company as “impact”? To be considered for our impact funds, each potential investment must meet a high bar of alignment with our impact themes. The impact case must be material, with the majority of a company’s revenues or business activities advancing one or more of our themes. The impact of the potential investment must also be additional, addressing a specific need that is unlikely to be met by other agents, be it competitors, governments or non-governmental organisations. We believe it is also important to understand a company’s or an issuer’s holistic impact. For example, with green bonds, we scrutinise not just the use the bond’s proceeds will be put to, but also the issuer’s wider business activities. With government bonds, we only invest where the proceeds are being used specifically to address one or more of our impact themes. We also assess any potential investment for unintended negative consequences that would outweigh its positive impact — for instance, the impact of a new recycling facility on local communities or the environmental implications associated with the data storage involved in digital solutions. Finally, the impact case for each investment must be measurable so that we can quantify and report on its progress over time. We believe investors must be able to analyse, track and measure impact outcomes as thoroughly as they do financial outcomes. We also believe this transparency helps encourage much-needed capital to be directed towards impact companies and issuers. How exactly do you measure impact? To measure impact, we create custom key performance indicators (KPIs) for each company or issuer in our portfolios. The KPIs will vary depending on the security, sector or impact theme, but they must all be logical, transparent and based on reliable information, such as science-based insights from our climate research team. For example, we may measure the amount of greenhouse gas emissions avoided by recycling waste instead of sending it to landfills or the percentage of a population provided with clean water, internet access or affordable housing. In addition to monthly publications on our funds’ financial performance, we publish annual reports on KPIs and the impact of our holdings. How do you address the UN SDGS? When the United Nations (UN) published its Sustainable Development Goals (SDGs) in late 2015, we were pleased to see how well our themes aligned. Today, between our impact equity and bond approaches, our investments address all 17 SDGs, either directly or indirectly. For each company and issuer in our portfolios, we tag the goals that we believe they align with, as well as any of the 169 underlying targets outlined by the UN. While we do not manage the portfolios to a targeted level of alignment, our high standards for inclusion result in an investment strategy that naturally supports many of the SDGs. All the companies and issuers we invest in offer what we consider to be much-needed solutions to many of the major challenges identified in the SDGs. Wellington is proud to continue supporting the UN SDGs. Which asset class is most suited to impact investing: equities or bonds? Both equities and bonds provide excellent opportunities for impact investing, with large and growing opportunity sets. In fact, we believe the two asset classes provide complementary impact exposures and can be blended within a broader portfolio to create compelling synergies. Some themes are easier to access for fixed income managers, such as affordable housing bonds issued by local housing associations. Other themes, such as financial and digital inclusion, are more accessible for equity managers. What about financial returns? We believe impact investing does not entail giving up return potential, and our experience to date actually points to the contrary. Both the Wellington Global Impact Fund and the Wellington Global Impact Bond Fund aim to deliver competitive returns for clients alongside positive social and environmental outcomes. All our impact investments must meet specific financial thresholds to be considered for inclusion in our portfolios. In our view, many of the companies we target also benefit from structural tailwinds given their focus on products and services that seek to address some of the world’s most pressing issues. Companies that can provide effective solutions to those problems are likely to see healthy growth in their revenue and market share in the years to come. How do you bring it all together? After defining the universe of potential investments that meet our impact criteria, we focus on selecting the best combination of securities to reach our financial objectives, via bottom-up research. Key to successfully building and managing portfolios, in our view, is our multi-disciplinary approach. We regularly integrate the insights and perspectives provided by Wellington’s global teams of experienced research professionals across industries, asset classes and investment styles. This includes close collaboration with our career credit analysts and industry specialists, who provide detailed insights at the security, industry and sector level. We also draw heavily on the expertise of our dedicated ESG research and climate research teams. How do you approach engagement? We seek to enhance both the impact and the financial value of our portfolios further through active engagement with company management teams and boards. Engagement helps us identify opportunities for companies to improve, measure and report on their impact activities. It also allows us to report more meaningful data at the issuer and portfolio level. Ultimately, engagement creates an important feedback loop and mechanism to help us deliver and measure impact. What is so attractive about impact investing? Impact investing is an exciting space where we get to help clients align their financial objectives with social and environmental aspirations. We are committed to helping investors appreciate the potential benefits of directing their equity and fixed income allocations towards solutions that help people and the planet while pursuing their investment goals. For more information, please visit wellingtonfunds.com/sustainable-investing INVESTMENT RISKS CAPITAL: Investment markets are subject to economic, regulatory, market sentiment and political risks. All investors should consider the risks that may impact their capital, before investing. The value of your investment may become worth more or less than at the time of the original investment. The Funds may experience a high volatility from time to time. CONCENTRATION: Concentration of investments within securities, sectors or industries or geographical regions may impact performance. CURRENCY: The value of the Funds may be affected by changes in currency exchange rates. Unhedged currency risk may subject the Funds to significant volatility. EMERGING MARKETS: Emerging markets may be subject to custodial and political risks, and volatility. Investment in foreign currency entails exchange risks. EQUITIES: Investments may be volatile and may fluctuate according to market conditions, the performance of individual companies and that of the broader equity market. CREDIT RISK: The value of a bond may decline, or the issuer/guarantor may fail to meet payment obligations. Typically, lower-rated bonds carry a greater degree of credit risk than higher-rated bonds. SUSTAINABILITY RISK: Sustainability risk can be defined as an environmental, social or governance event or condition that, if it occurs, could cause an actual or potential material negative impact on the value of an investment. PLEASE REFER TO THE FUND PROSPECTUS AND KEY INVESTOR INFORMATION DOCUMENT FOR A FULL LIST OF RISK FACTORS AND PRE-INVESTMENT DISCLOSURES. For professional and institutional investors only. This material and its contents are current at the time of writing and may not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of Wellington Management. This material is not intended to constitute investment advice or an offer to sell, or the solicitation of an offer to purchase, shares or other securities. Investing involves risk and an investment may lose value. Investors should always obtain and read an up-to-date investment services description or prospectus before deciding whether to appoint an investment manager or to invest in a fund. Any views expressed are those of the author(s), are based on available information and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients. Except where registered for public sale, Fund units are offered only to qualified or professional investors on a basis that it does not require the registration of the Fund for public sale. The Fund only accepts professional clients or investment through financial intermediaries. Please refer to the latest Key Investor Information Document (KIID), the Fund offering documents for further risk factors, pre-investment disclosures, and the latest annual report (and semi-annual report) before investing. KIIDs are available in the official languages of each country in which the Fund is registered for sale (please visit www.wellington.com/KIIDs). UCITS Funds are authorised and regulated as a UCITS scheme by the Central Bank of Ireland-Wellington Management Funds (Ireland) plc. This material is provided by Wellington Management International Limited (WMIL), a firm authorised and regulated by the Financial Conduct Authority (FCA) in the UK. ©2021 Wellington Management Company LLP. All rights reserved.
Campe Goodman, CFA Fixed Income Portfolio Manager
Tara Stilwell, CFA Equity Portfolio Manager