RIA firm Ritholtz Wealth Management and asset manager WisdomTree are combining to launch an index for investors seeking broad, diversified exposure to crypto assets. The RWM WisdomTree Crypto Index is the basis for a separately managed account platform, provided by licensor Onramp Invest, that will allow financial advisors to put clients in crypto.
“We wanted to be able to give people who want it diversified exposure to crypto beyond just, you know, the layer-one behemoths of Ethereum and Bitcoin,” said Michael Batnick, director of research at Ritholtz Wealth Management, which is based in New York City. “It’s a big world out there.”
The separate accounts will be available to Ritholtz’s clients first, and Onramp is working to expand distribution though additional RIAs, Batnick said. “And then beyond that, we would also love to be able to offer this to individual investors who aren’t clients of ours, our clients or anyone’s, but just want exposure to the crypto space,” he added
Accounts are to be custodied and traded at Gemini, the crypto exchange founded in 2014 by twin brothers Cameron and Tyler Winklevoss. The RWM WisdomTree Crypto Index, scheduled to launch Dec. 3 is currently composed of 36% Bitcoin, 20% Ethereum and 4% each of 11 other crypto assets ranging from payment systems to decentralized finance to the virtual-reality space known as the metaverse.
Its broad diversification helps to distinguish the index from several cryptocurrency indexes that have popped up in recent years. “In our view, this direct indexing implementation of the RWM WisdomTree Crypto Index … is the best-assembled structure and diversified crypto asset exposure currently available to U.S. investors and particularly the RIA community,” said Jeremy Schwartz, global chief investment officer at WisdomTree.
The new index will allow the weights of its components to fluctuate in line with market movements, and exposures to additional assets may be added as appropriate. “The moment of mass adoption for digital assets, blockchain, DeFi, metaverse, and web3 technology has arrived,” Batnick said.
As wealth managers, we have a responsibility to adapt our portfolios to this burgeoning opportunity. As fiduciaries, we have an obligation to do so in a sensible way while harnessing the benefits of increased diversification.”
Onramp, an integration platform that provides access to crypto assets for RIAs, will supply the separately managed account architecture, rebalancing technology, and customer support for financial advisors.
The separately managed account carries an index fee of 50 basis points; Ritholtz gets a share of that fee but will not charge clients an advisory fee on top of it, Batnick said. Clients will also pay transaction fees of 70 basis points.
Ritholtz is letting its clients know about the index and SMA, but “we’re not pushing this on anyone,” Batnick said. “That’s not what we’re trying to do here. But for people who had asked us if we have a Bitcoin solution, the answer used to be no. Now the answer is yes.”
Crypto is widely seen as a speculative asset class, and advisors who advise clients on it typically tell them to own a small allocation. Batnick said that an allocation to the RWM WisdomTree Crypto Index SMA in the low single digits is appropriate for a typical investor who wants to include the investment in their portfolio.
-Read original story on Barron’s