Charles-Edouard Bilbault
Global Equities Portfolio Manager
R-co Thematic Blockchain turned One in July
In July, the FOMC raised rates by 25 bps after pausing in June and reaffirmed their data-driven policy going forward. This let the market hope for July to be potentially the last rate hike for this cycle.
July was a constructive month for digital innovation. Digital Assets / Fintech portfolio companies performed particularly well, supported by positive regulatory news in the US. Coinbase, Galaxy Digital or Bakkt gained back part of their market discount. Blockchain Infrastructure players continued to be bought back by the market, as digital assets have been hovering around what appear to form new price resistance levels. From a flow perspective, blockchain equity investment products received US$46.8m net inflows in July. This makes this asset class globally net flows positive year-to-date and its total AuM at a bit more than US$2.2bn (1).
The AI theme also continued to show good strength in July. Data analytics leader Palantir continued to gain market recognition for its Artificial Intelligence Platform. The idea that Blockchain and AI can cross fertilize and contribute to sound innovation is also gaining traction. The media company NewsCorp, for instance, reportedly explores blockchain technology to monitor their published content, once used by external AI models. On that same theme, one of our portfolio companies, Vobile, partnered back in 2020 with the Ant Blockchain to secure their copyright management and monetization business. Vobile uses a proprietary AI-based software to spot evidences of illegal video content streaming. On top of that, it uses a blockchain to secure the audit trail of such infringement evidence. Vobile services clients like Disney, Warner, HBO.
On the portfolio management side, we tactically trimmed best performers from the Digital Assets / Fintech and Blockchain Infrastructure buckets and increased our Audit Trail and Transportation / Logistics exposure. We namely added renewable energy utility Acciona Energia post results. The Spanish power company uses blockchain to track the provenance and nature of the energy produced for their clients. At month-end, fund’s equity exposure was 95.6%(2).
In July, Paris received the 6th edition of the Ethereum Community Conference (EthCC). This international event is dedicated to digital innovation built on Ethereum, the second largest blockchain by market capitalization globally. The conference was sold out with 5500 tickets, hundreds of lectures and meetups in and around the conference venue. It was the opportunity for the industry to catch up on key innovation topics. Many came to Paris during the conference even though they couldn’t get an entry ticket to arrange private meetings and side events with industry players. In July as well, Société Générale Forge received the first ever Digital Asset Services Provider license (“agrément PSAN”) issued by the AMF. This is a positive signal for the industry and bodes well for the transition to the European regulatory MiCA framework recently ratified by the European Union.
Industry news to watch
Announcements made this month by established companies of blockchain based innovations continued to pertain to various sectors of the economy and enterprise use-cases. Among many others:
- Google asks developers to be explicit about digital assets used in the applications made for Google Play platform (source: Google). This change of policy at Google Play store shows how tokenization is getting more and more standardized and explicitly part of digital innovation as a whole.
- Dior discretely launches NFC chipped sneakers with embedded NFT (source: Dior). Dior B33 sneakers launch was discrete and shows how the luxury industry is taking advantage of blockchain based technologies. It enhances demanding customers experience with additional services. Purchasing the B33 sneakers comes along with digital twins and a dedicated digital platform providing customers with specific services and experiences.
- Bernstein estimates that US$5tr financial assets could be tokenized in the next 5 years (source: CNBC). That would bring efficiency and speed up asset ownership secure transfers.
- Blockchain will be used to track direct and indirect carbon emission made by Aramco-controlled SABIC’s ecosystem and supply chain participants (source: Ledger Insights). The traceability allowed by blockchain technologies is expected to be instrumental to monitor “Scope 3” CO2 emissions made by SABIC’s supply chain and later be used for recycling processes.
