Author and investor William Mougayar has launched a blockchain-based cryptocurrency index fund.
Announced yesterday, Mougayar is one of 12 managers to open up a fund on iconomi, a blockchain-based digital asset management platform. According to Mougayar, however, his fund will distinguish itself by allowing investors to benefit from something he is uniquely able to provide – his expertise.
"I'm able to balance and rebalance the basket in a favorable way. And that insulates the average user from some of the blind spots that they may be facing," he said.
On this point, Mougayar offers no shortage of credentials, having authored a book "The Business Blockchain," published by Wiley last year, as well as launching a popular conference focused on the emerging digital asset economy last May.
Mougayar told CoinDesk:
"The value proposition is that I am part of this market. I talk to these companies. I know their CEOs. I know their founders. I know the real story."
Notably, for more novice investors, the fund will seek to invest in the broader cryptocurrency asset class, beyond better-known options such as bitcoin.
Toward that end, the fund will include allocations of 15 cryptocurrencies that will change based on Mougayar's outlook on the cryptocurrency space. Currently, Mougayar will hold the largest allocation, at 20 percent of the total index, in ether, and 10 percent in bitcoin.
Three lesser-known cryptocurrencies – steem, nexium and cofoundit – will each represent 10 percent of the index's holdings. The remaining 10 cryptocurrencies, which include melon, augur and basic attention token, will each represent 4 percent of the holdings.
"Having a basket of cryptocurrencies, managed by someone who knows what they are doing, in a way removes some of the risks for the average consumer," Mougayar said.
Fund costs and structure
But while new crypto index funds are launching almost daily, Mougayar's fund seems to be courting a new class of retail investor – those with more experience in cryptocurrency than in traditional markets.
Mougayar's index charges a relatively low total fee of 5 percent, which is in stark contrast to the very high "two-and-twenty" fee structure fiat-based hedge funds sometimes charge.
Managers of those funds will typically argue that their research work, and sometimes active trading, drive up costs – and that their returns justify their fees, though that assertion is a highly controversial one. Mougayar told CoinDesk that he charges a premium over the 2 percent sometimes charged by low-fee passive funds because he believes active management can provide investors with substantial additional value creation.
Also, unlike other cryptocurrency hedge funds, Mougayar's does not require a minimum investment, something that should appeal to smaller retail investors.
"It's like you're on an exchange. You can buy 0.1 bitcoin. There is no minimum," he said.
Diving deeper, Mougayar's partnership with Iconomi divides two responsibilities typically consolidated in a single firm in other lower-fee tracking funds.
In order to invest in Mougayar's fund, users must first load their account by depositing bitcoin or ether on the Iconomi platform. While Mougayar selects the initial portfolio allocations and re-weights regularly, the investor's user account will reside on the Iconomi blockchain platform.
An additional advantage of partnering with Iconomi, Mougayar argued, is that investors do not need to manage the custody of their own key pairs.
William Mougayar image via YouTube