How Does Snowball Create Its Portfolios?
The Snowball Mission
The short answer is: very carefully and very deliberately, and always with our investors’ best interests in mind. Snowball has made it its mission to democratize cryptocurrency investment by enabling the small retail investor (those who normally invest in stocks, bonds, mutual funds, etc.) to enter the crypto market in ways that are generally only available to the wealthy and experienced accredited investor. This significant, untapped wealth of retail investors desperately need a simplified approach to “smart” investing, particularly one that mimics the growing trend toward index investing. We are pursuing that goal with single-minded intent!
Why index investing?
The selection process for investing in individual tokens is fraught with uncertainty and suffers from uneven regulation. Selecting winners from losers and trying to time the market has proven incredibly difficult. However, actively-managed portfolios often underperform, not to mention that the fees they charge can significantly impact any investor gains. As a case in point, globally-recognized cryptocurrency hedge fund Pantera Capital’s Digital Asset Fund has underperformed against bitcoin, dropping 26% last May compared with bitcoin’s decline of 15%. Similarly, Hedge Fund Research’s HFR Cryptocurrency Index, which tracks crypto hedge fund performance, was down 44.14% at the end of July, underperforming bitcoin which was down 39.67% over the same time period. Nobel laureate Eugena Fama and Kenneth French carried out a study which found that only 2% of the 3,156 fund managers they examined had statistically significant evidence of success, and concluded that a portfolio of low-cost index funds is likely to perform as well as a portfolio of the top 3% of actively-managed funds, and better than the other 97%!
The Snowball Selection Process
The Snowball team is consistently observing the cryptocurrency market, looking for new entrants into the index space, then performing the necessary fund evaluation and selection process to bring new portfolios onto our platform. While the effort to evaluate indices is expected to be ongoing, since the methodologies of indices do not change, the effort is singular, allowing significantly more coverage by a smaller team, while providing broad market coverage across the entire spectrum.
Snowball will employ a strict selection process to assure that portfolios listed on its platform meet a high standard of quality. We have identified the following critical evaluation criteria as the baseline for our selection process.
Our team will also evaluate the overall fund’s strategy to determine if there is merit in the approach. Funds should have a clear approach and a well-described methodology. For example, two separate funds may both cover the “Top 10 cryptocurrencies by market cap”, but approach them differently. One might allocate capital equally across each of the 10 cryptocurrencies, while another may do so more arbitrarily, based on a specific rationale. Another may allocate by market capitalization or some derivation thereof. One fund may employ a tolerance or time-interval-based rebalancing strategy, while another might not employ any rebalancing methodology at all. There are a multitude of variables that may exist. Our team will evaluate and select only the funds that appropriately describe their methodology and approach, as well as their rationale.
Regulatory Compliance or Independent Certification
Not all portfolios available under the Snowball platform may have been submitted for regulatory scrutiny or independent certification. However, for the ones that have, Snowball will indicate them with a high-visibility badge. Snowball will also include this as a screening criterion for manual searches. Our team will not include funds that have been identified in the community as likely frauds or those that do not have the appropriate track record.
We believe a fund’s ability to attract outside capital, whether from public investors or via institutions, is one of the surest ways to demonstrate its credibility. This is not unlike the way hedge funds are evaluated in non-cryptocurrency funds, and serves as a cornerstone to the way Snowball will evaluate fund selection. For a fund to participate in Snowball’s platform, it will be required to have no less than USD 10 million in Assets Under Management (AUM), and no less than ten separate sources of capital.
What Does This Mean For Our Investors?
Snowball’s Smart Crypto Investment Automation (SCIA) platform provides easy access to this carefully selected and curated selection of regulatory-compliant cryptocurrency portfolios. Snowball will help narrow the selection process utilizing its robust algorithm, taking into account the individual’s investment objectives, investment time horizon, and aversion to risk. Our platform will also allow investors to perform a manual screening process based on criteria designated by our team to enable a greater range of control and selection for experienced investors. Snowball will feature industry-leading comparison tools and will provide detailed information on each fund. In the future Snowball may Include fund performance ratings and more advanced evaluation criteria such as research analysis. commentary, and performance evaluation.
Snowball is the first Smart Crypto Investment Automation (SCIA) platform that enables access to professionally curated portfolios, empowering everyone to invest like accredited investors.