Noelle Acheson is a 10-year veteran of company analysis, corporate finance and fund management, and is a member of CoinDesk’s product team.
The following article originally appeared in CoinDesk Weekly, a custom-curated newsletter delivered every Sunday, exclusively to our subscribers.
At least that’s the message conveyed in a report CoinDesk published last week on Melonport. The startup’s idea is to counter the high costs and onerous requirements of hedge funds, and make it easier to set up and manage portfolios.
Melonport is not alone. Several companies are taking a run at this space, from a range of angles. Some focus on the underlying platform; others focus on the returns, offering access to a managed selection of digital assets. Most seem to regard the hedge fund industry as their target.
But, I would argue the real target is elsewhere.
On the surface, blockchains and hedge funds seem made for each other. Setting up a hedge fund is expensive, not just because of the upfront legal and administrative costs, but also because of the amount of money needed to break even ($300m is considered ‘small’).
Furthermore, that amount is increasing, as rising regulatory costs, pressure on fees and lackluster performance are encouraging a consolidation of the industry. Times are tough – the first three quarters of 2016 saw the highest number of closures since 2008.
However, on a blockchain platform, the costs would be lower due to enhanced transparency, smoother data flows, efficiencies in custodianship and more automated compliance.
And the assets currently available, with their ‘alternative’ structures and relatively high risk profiles, seem to be right…