Charles-Edouard Bilbault
Global Equities Portfolio Manager
2023 started with a high level of volatility and sharp reversal of end of 2022 market direction. Investment flows for risk assets rebounded clearly over the month, supported by purchases of short squeezed bets. In this context, most blockchain proxies repriced from their December lows. They were supported by positive flows on digital assets and robust activity on blockchain applications developments.
In terms of flows, there has been a positive pick-up for digital assets investment products, as financial conditions start to be perceived as slightly eased. January witnessed the highest monthly level of inflows for the sector since July 2022, reaching US$117m(1). Flows from Germany were particularly significant. They represented 40% of January global inflows to the digital assets space, with US$46.4m coming in from Germany. This resonates with DekaBank’s announcing at the end of January that the German Bank will start to offer digital assets services to their clients (cf. Industry news to watch). As a result, global assets under management increased to US$28bn, 43% higher than November 2022 lows(2).
In January, the portfolio rebounded sharply by +19.8% from end of December lows(3). It benefited from the selective purchases of oversold blockchain pure players we realized at the end of the year – in Digital Assets / Fintechs and Blockchain infrastructure, both outperforming buckets for the month. Most shorted equities, for the likes of Coinbase for instance, steeply rebounded from trough valuations.
If you tighten the string too much, it will snap, and if you leave it too slack, it will not play.”
The Musician in Little Buddha
We took some profits on best performing values from the Digital assets / Fintechs and Blockchain infrastructure pockets. The objective was to maintain the portfolio exposure to all blockchain thematics and readjust the mechanically induced exposure bias created by blockchain pure players outperformance. We also aimed at keeping our cash level sufficiently high to be able seize buying opportunities during these volatile times. The portfolio was invested at 96% at the end of January(4).
We bought underperforming though fundamentally solid and promising companies. We namely added Vobile Group to our holdings. Vobile is the global leader in detecting fraudulent uses of online video content. They use blockchain technology to record fraud evidences they collected online. They are already very present in the US with clients like Disney, Warner or HBO. They now aim at conquering the local Chinese market which could significantly contribute to top line growth for the next 3 years with some margin expansion from a more profitable product mix(5). We also reinforced our position on the global cybersecurity and digital identity leader Wisekey. Wisekey is namely working on post-quantum cryptography with the US National Institute of Standards and Technology.
Industry news to watch:
Announcements by established companies of blockchain based innovations continued to pertain to various sectors of the economy and enterprise use-cases. Among many others:
- Yves Saint Laurent pursues its Web3 developments with “YSL Beauty Night Blocks”
- FactSet and Coin Metrics collaborate to deliver digital assets data and analytics
- DekaBank will use Swiss digital assets services provider Metaco to offer crypto custody and capital market solutions
- Société Générale Forge borrowed the equivalent of US$7m in stablecoins from decentralized finance
- Goldman Sachs tokenization platform GS DAP goes live
- PMU launches the NFT project Stables, and bets on Web3 to widen their customer base to younger generations
- Partnerships between tech giants and blockchain ecosystems continue, with for instance Avalanche Validator node’s on Amazon’s AWS cloud services.
- Healthcare leader Pfizer invested on VitaDAO, a decentralized application aiming at contributing to research on longevity and used decentralized governance tokens to vote for “corporate” decisions.
- Moody’s is building a scoring system for stablecoins.
