The AtonRâ Fund leaps into Blockchain & Digital Assets

What happened

We are excited to announce the enhancement of the AtonRâ Fund through the inclusion of our Blockchain strategy, AtonRâ Blockchain & Digital Assets, effective as of 29 February 2024. This addition marks the first significant evolution of the AtonRâ Fund's strategy since its inception in July 2020.

Our dedicated blockchain strategy, which has been managed on a standalone basis since March 2022, invests in leading companies within the blockchain ecosystem. It offers exposure to the dynamic growth of blockchain technologies while maintaining a strategic distance from direct investment in cryptocurrencies.

The decision to integrate AtonRâ Blockchain & Digital Assets into our fund portfolio was driven by thorough market analysis and a conviction in the transformative potential of blockchain technology. In particular, the SEC’s approval of the spot Bitcoin ETFs played a significant role in making cryptocurrencies a new investable asset class.

Impact on our Investment Case

Why adding Blockchain & Digital Assets to the AtonRâ Fund now?

Investors don’t gain access to a new liquid asset class every day. The SEC's approval of spot Bitcoin ETFs in January 2024 marks a pivotal shift in policy. This development broadens the asset class spectrum available to investors and signals the potential for future approvals of other crypto ETFs.

At the time of approval initial inflows to the spot Bitcoin ETFs were mitigated, with only $1.5bn raised in the first two weeks of trading. By February, net inflows reached approx. $6bn, surpassing the number of newly minted Bitcoins. Quarterly earnings from exchanges such as Coinbase Global Inc and trading apps like Robinhood suggest minimal to no cannibalization from existing crypto investors. 

The record-setting net inflows into Bitcoin ETFs underscore growing investor interest and confidence in cryptocurrency as a new asset class. These ETFs have positively impacted the price of Bitcoin, which is nearing its historical highs. As crypto prices increase, the profitability of blockchain-related stocks, our area of focus, also rises.

Impact on the risk-reward profile of the AtonRâ Fund

The AtonRâ Fund now comprises 8 strategies, each with its own role within the portfolio.

The integration of Blockchain & Digital Assets introduces a higher volatility component to the AtonRâ Fund, balanced by the potential for higher returns.

In examining our portfolio construction, the diversification role that blockchain-related stocks bring to the AtonRâ Fund is essential. The table below shows the one-year correlation among the various themes in the portfolio. There’s a noticeable difference in correlation between the strategies of our three main sectors (technology, healthcare, and clean energy) with blockchain. Blockchain exhibits on average the lowest correlation to the existing themes.

Fintech is the only strategy with a high correlation to Blockchain & Digital Assets which is unsurprising since Blockchain is a building block of our Fintech strategy.

With blockchain-related allocations now making up approximately 15% of the AtonRâ Fund, both directly through our Blockchain strategy and indirectly via our Fintech exposure, we believe this level of diversification is substantial enough to influence the fund's overall performance.

Future changes to the AtonRâ Fund

Our commitment to the multi-theme approach of the AtonRâ Fund remains strong, especially in the current market environment. The addition of Blockchain & Digital Assets is a testament to our proactive strategy.

In line with our strategic guidelines, we will continue to review the number of underlying themes, equally weighted, within the fund. The total number of strategies may vary from four to ten, contingent on our conviction in the potential of new opportunities such as blockchain. This flexibility ensures that the AtonRâ Fund stays at the forefront of investment innovation, ready to adapt to market developments and emerging trends.

Our Takeaway

After almost two years of existing as a separate strategy, we added Blockchain & Digital Assets to the AtonRâ Fund. This decision is anchored in the groundbreaking approval of Bitcoin ETFs, which legitimizes digital assets as a new asset class and signals a transformative shift in the investment landscape.

While the initial investments in the spot Bitcoin ETFs have been positive, they represent merely the tip of the iceberg, especially considering the $36tn of U.S. retirement assets.

In light of these developments and our strong conviction in the transformative power of blockchain technology, excluding Blockchain & Digital Assets from the AtonRâ Fund would be a significant omission. This integration positions the fund to capitalize on emerging opportunities and navigate the evolving investment landscape effectively.

For more detailed information about this strategic update, we invite you to contact us directly.