It’s an Asset Allocation Thing — Diversify more than you think!
I am alive and kicking! In fact, more than that, I am conscious, on purpose and present.
This is important because I received an email recently from a potential investor in the AAAX saying he thought I had abandoned the AAAX. Wow, it is tough in this age of information and “privacy” to ensure people know that you are alive and well. I have the same problem with my family. If they don’t hear from me they assume something “happened” to me.
Seriously, I apologise to investors out there for not being more interactive. It is something we have been working on behind the scenes. However, sheesh guys, we have over 40 investments in our DAA — we have been busy!! Not to mention an extremely rampant market!
Welcome to the inaugural Asymmetry Blog post! We are excited!
In this blog there won’t be any beating around the bush. We like to add value or say nothing. We will always be open and direct — please I urge you not to take anything we say personally (read: The Four Agreements ). Please also be direct and give us all your feedback — we need all the wisdom we can get!
We manage money across all asset classes (old and new economy) and we identified the Blockchain as a new asset class in 2013 and have started allocating client money to the Blockchain for the long term. While the short-term game is has been interesting and highly profitable we know it has not been down to our coin selection. Let’s not fool anybody here guys, this has been a rising tide — and it has lifted all boats.
I found it interesting when William Mougayar pointed to the success of his 3-month performance (310% vs the AAAX of 305%), which indeed was the top performing DAA over this period, was due to his being “in the landscape since inception”. Reason being, I have been analysing all kinds of financial instruments for 15 years now and sat in front of hundreds of analysts and I can assure you nobody knows which coins will be successful or which management team will succeed. If you meet someone that claims this — run! I am not being cynical. This is just new technology that arrived on the planet.
We are in unprecedented territory. Plus, the AAAX did just about the same return in over 3 months with triple the number of assets in the portfolio. Please don’t take this personally William, I am just trying to make a point on the “rising tide” with this good example — we love your picks and the work you are doing!
Fundamentally, at Asymmetry like most other managers, we like to take a deep dive into the fundamentals including: industry needs, blockchain operational systems, management teams, and where applicable the numbers. Indeed, this is how we manage the hedge fund. However, very shortly after doing this for many months I realised we needed to take step back and look at this like an asset allocation model.
I asked: How have humans behaved in previous scenarios on the planet when new technology has ignited in these sorts of proportions (great blog on this in the pipeline)? What more recent booms can we parallel with the Blockchain, and finally, how can we position ourselves with so many unknowns? In short, we like the technology; we like certain aspects more than others; and so, what is the strategy?
At this stage of the development of the Blockchain, we believe, one has to take a pragmatic approach and not get ahead of oneself in thinking that you know more than others. No, not in the age of information. In the “new economy”, we like crowd wisdom — it saves time and is proven to be highly accurate. We hope AI will assist us more in the not-too-distant future! What differentiates Asymmetry is the way we discern information and keep things simple: we manage money, we wanted our clients to have exposure, we wanted diversification, and needed an easy (one destination) and cheap (back-end algorithm) way to do this — Iconomi provided the solution!
But first, why and how much diversification? What about exposure size (Read: Exposure to the Blockchain? Yes, but HOW MUCH?)?
The similarities between the Blockchain boom and the Internet boom are staggering — ask Brock Pierce (watch from minute 9). The reason we put our hand on our hearts and say: it is impossible for anyone to back up with any solid fundamentals which applications will succeed is because the crowd will decide what it needs, and the crowd has not yet spoken. We focus on pragmatic diversification (weighted toward real-world needs — more on this in our next post) and follow the money!
We ran a simple model: We took the top 50 “dotcom” (or Internet stocks) ranked purely by market capitalisation at the peak of the “dotcom” boom (these included: Amazon, Yahoo, Google, Ebay, Priceline and Shutterfly), and allocated 2% to each of these 50 stocks (or IPO’s) to make up our 100% exposure to tech stocks (or the internet in our asset allocation). We then assumed that we went to sleep and woke up in 2017 (i.e. no portfolio rebalancing). We also assumed that 88% of the portfolio went to zero (i.e. none of the rest made it which is quite possible for the current ICO’s out there), and for certain, one would have been left with eBay, Yahoo, Amazon, Google, Priceline and Shutterfly. What would have been your annual returns since the peak in 2000?
The performance: a minimum of 14% p.a. in USD. Not bad considering even the most irrational of investors would a) not have let the losers get to zero, b) reweighted toward the survivors and c) certainly many more of those selected in the top 50 went on to become successful companies.
To conclude, you want exposure to the Blockchain applications in your portfolio. It will be the single industry providing real economic growth in double digits every year for many years to come. Could your investment go to zero? Yes, but it could also make 50% return p.a. or more for the next 10 years. This is highly possible, and I like the asymmetric stack in that trade. Should you diversify? Hell yes! How can you diversify? Buy the Asymmetry Asset Array Index (AAAX) or even diversify your DAA’s to gain the sort of diversification that we believe is necessary at this stage of the development cycle. It is just too early to be cute.
No truer quote applies to this technology than that of the Carpenters: “We’ve only just begun”.
If you would like to get in contact:
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Disclaimer: Any content published by Asymmetry Asset Management or its affiliates is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. The information in such publications may become outdated and there is no obligation to update any such information.
