Digital assets continue to attract wealth management attention and from large organisations, notwithstanding sharp price volatility.

Schroders, the UK-listed wealth manager, has taken a “strategic minority stake” in Forteus, an asset manager focused on blockchain technology and digital assets. 

Forteus is the asset management arm of the Numeus Group, a diversified digital asset investment firm. The Numeus business is led by Nobel Gulati, who is the former CEO of Two Sigma Advisers. It was founded by a team of finance, blockchain and technology professionals.

The move by Schroders to invest in such a business indicates how digital assets – a term covering a wide field such as bitcoin, tokens and smart contracts – continues to attract wealth management attention. This has continued despite dramatic market shifts, such as falls in bitcoin prices or the collapse of some so-called “stablecoins.” Large financial institutions such as JP Morgan, Julius Baer and Guggenheim Partners, among others, have pushed resources into the space. (See here for an overview of developments and the issues at stake.)

“Schroders has chosen to invest in a leading-edge specialist in blockchain technology and digital assets in order to support its ongoing education and research in this sector and to develop investment solutions for the benefit of its clients,” Schroders said in its statement yesterday. 

Forteus will offer a range of investment solutions which span customised portfolios of external managers, yield generation, actively managed thematic portfolios and, over the long term, tokenization. Once available, Schroders will give clients access to Forteus capabilities where appropriate, Schroders said. 

“Blockchain will be a catalyst for fundamental change within asset management, financial services at large, and many other industries more broadly. It not only has the potential to transform the efficiency of existing solutions but will drive the democratisation of private assets; it represents a new frontier of technological and financial innovation,” Peter Harrison, group chief executive, Schroders said.

Gideon Berger, former co-chief investment officer of Blackstone Alternative Asset Management, is Forteus non-executive chairman. The business, which is based in Switzerland’s “crypto valley” of Zug, has an office in New York.

The volatility of some digital assets has created controversy and pushback from some in the investment world. For example, PGIM, a $1.4 trillion investment arm of US-listed Prudential Financial, said in May this year that cryptocurrencies such as bitcoin are a “poor choice” for long-term investors and make portfolios riskier and more volatile. 

The business fired a salvo at cryptos in the wake of the collapse in price of so-called “stablecoins.” (These  are cryptocurrencies which attempt to peg market value to some external reference – for example, fiat currency such as the dollar. Other stablecoins use algorithms or different methods to keep their values from fluctuating too much.) Two main stablecoins from the crypto project Terra have collapsed with some calling the incident a Ponzi scheme. Terra dollar sister token Luna has fallen dramatically. UST lost its dollar peg when millions of investors sought to cash in on their tokens at the same time. Investors learned that the UST reserve mechanism was flawed – UST is an algorithmic stablecoin, backed by its sister asset Luna. 

Even so, as this news service knows, there is still considerable interest among financial industry practitioners in cryptocurrencies and the underlying blockchain technology.