Innovative investment allocation for RWA and family offices

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24-07-01 11:12

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Original title: "RWA and Family Office's Innovative Investment Allocation"

Original author: Ye Kai (WeChat/Twitter: YekaiMeta)

On June 27, the Web3 Elite Meeting-Family Office and RWA Virtual Asset Investment hosted by Caihua Society FinMeta was successfully held at the China-Hong Kong Financial Elite Exchange Center. The guests and friends at the meeting and online friends discussed the topics related to family office and RWA virtual asset investment.

Ye Kai was invited to give a keynote speech on RWA and Family Office's Innovative Investment Allocation. Because it was an oral sharing on the spot, the text content was sorted and supplemented with the live video afterwards for your reference, which can also be used as a new perspective for family office investment.

From the perspective of asset management companies such as BlackRock in the United States, even though the Bitcoin spot ETFs of these asset management companies may be more than 10 billion US dollars, compared with their asset management scale, it is basically less than 1-2%. If we look at other asset management companies, banks, pension funds, etc., the allocation of virtual assets such as Bitcoin is still a relatively small share, not exceeding 1-2%, and no more than 5 points. Of course, for these institutions with relatively stable investments, Bitcoin spot ETF products still need a cycle. It is only a short period of half a year. Generally speaking, for example, after one year, the specific data of a cycle will be run out, which is required for large-scale fund allocation.

I used 5 words for the on-site sharing: combination, inflation, hedging, activation and inheritance.

Combination

The key to the asset allocation strategy of a family office is the investment portfolio. We do regular investment funds and also have our own investment portfolios. For example, the common one is: 6-3-1 combination, that is, 60% is allocated to relatively stable returns, 30% is allocated to relatively high returns and medium-to-low risks, and 10% is allocated to some high risks, such as new coins, tokens of different tracks such as #AI, #DePIN, #meme, etc. Although 10% of the funds, the cycle is short and the rolling is fast, and it turns around every 2/3 months, which can almost leverage a similar amount of funds of 40%. However, new coins need to be invested quickly, so you need to have keen investment and research insights, often hang out in the community, listen to space, pay attention to new developments, and participate in online and offline activities.

Because family offices generally lack professional capabilities in virtual assets, they can entrust professional Crypto Funds to invest or become LPs of related crypto fund products. The key is to match investment strategies, cycles, and yield requirements.

In fact, in traditional fund investment, such as our film and television funds, we often adopt the "6-3-1" combination, 60% of which is invested in TV with relatively stable returns, 30% in movies with high returns but also dismal box office, and 10% in short-term micro-short dramas with short cycles and high returns.

In Crypto Fund, the "6-3-1" combination is also adopted, 60% is allocated to Bitcoin or Bitcoin spot ETF products with relatively high liquidity, 30% is allocated to quantitative eating Bitcoin and other mainstream tokens, and 10% is allocated to new coins. The cycle of a new token in a hot track may be only a few months, and it will be quickly completed and then continue to roll investment.

In the previous keynote speech, Mr. Zhou from Singapore Bank mentioned two very encouraging data. One is that real estate is still the main investment, but it mainly revolves around consumer entertainment commercial real estate, such as hotels, shops, etc. It was mentioned that Mr. Ma’s wife recently bought 100 million Singapore dollars of commercial real estate in Singapore; the other is that the first generation of Singapore family offices generally have a more stable investment strategy, while the second generation has a more aggressive investment strategy. They began to allocate Crypto investment, even reaching 10% of the asset allocation, and 40% of these are allocated to physical Bitcoin, and 60% are related virtual asset investment products or Crypto Fund. It’s just that Singapore’s virtual asset investment withdrawals are not recognized or accepted by banks. Compared with the transaction flow of licensed exchanges in Hong Kong, banks recognize the source of funds. This may be the advantage of Hong Kong RWA.

Inflation

Global funds are beginning to pursue anti-inflation. Now the preference of funds has shifted from short-term liquidity to anti-inflation, so high-quality real estate, high-tech, especially AI stock ETFs, and high-quality corporate bonds in the United States have begun to become the first choice for funds. Are there any better product forms for these real estate and equity products, including fixed income products of corporate bonds, based on traditional investment products? Is it possible to generate more dividends? Can liquidity be more flexible? These are all things we can think about further.

For example, real estate. The current real estate investment strategy has changed a lot. It focuses more on real estate with operating cash flow. In fact, we can pay attention to Blackstone's REITs asset allocation strategy. It has made major adjustments to its real estate asset allocation since last year, and has begun to adjust residential apartments to commercial leasing, data centers, logistics warehousing, laboratories and industrial plants, etc. Real estate products, from corporate bonds to fixed income of ABS to off-balance sheet REITs, can have different product forms. After combining with RWA, it can be more flexible, including share and liquidity. For example, real estate with operating cash flow is more like digital REITs, and cash distribution can be more flexible. Traditional REITs generally distribute cash income once a year or half a year, while RWA digital REITs can distribute cash monthly, weekly, or even daily, so such products are more attractive in terms of expectations and liquidity.

President Cici of Yingli Family Office shared that real estate and virtual assets in Singapore family offices are not tax-exempt. Can we invest directly in virtual assets and indirectly allocate virtual assets through RWA by investing in financial products to avoid tax burden? In addition, alternative assets such as commercial real estate are relatively large in size, with a lock-up period of 3-5 years. Can RWA be more flexible and advantageous in terms of cycle and liquidity?

High-quality corporate bonds, this type of fixed income product is a regular configuration, there is nothing special, but the yield will not be too high, and it is very good at 6-8 points annualized. But if combined with RWA design, can it be combined with the incremental intrinsic value after tokenization on the basis of conventional annualized returns, combined with the premium of new tracks and new concepts, and the diversified liquidity in the secondary market after tokenization, will there be new surprises?

The liquidity of conventional tokenized bonds and fixed-income products is generally tokenized shares and dividends are distributed by holding tokens, but in fact, the model design of tokenization can be very flexible and diversified. For example, it is not necessary to design a dividend distribution, but to regularly invest the operating cash flow into the liquidity pool of tokens based on a certain proportion of the accounting, based on agreed conditions such as smart contracts, which is equivalent to the liquidity fund of RWA tokens, thereby realizing the stage rhythm and value growth of RWA tokens. Due to the time sequence and the scarcity of demand brought by Maker Fund, the oversold premium of RWA product configuration can appear, which far exceeds the original yield of real assets. The latter model is also suitable for the tokenization of alternative investments of non-securities income.

In addition, the NFT form of Web3.0 can also form a diversified portfolio design. The only NFT on the chain can be used as a digital financial certificate, which can be a rights certificate, similar to paper stocks; it can also be an airdrop qualification instead of a profit dividend, which is equivalent to a scarce identity certificate, so that some scarce rights such as pre-sale qualifications, priority, decision-making rights, etc. can be obtained. NFT can be combined with RWA tokens to achieve different modes of combination design.

Hedge

The assets of family offices often come from the core industries of the family. The value of RWA lies in the fact that it can form a certain hedge with the core industries of the family office's client family, or to maintain and premium the value of industries that are beginning to decline, or to make forward-looking investments in industrial innovation.

For example, in the field of new energy photovoltaic storage and charging, China's manufacturing capacity in the new energy industry has accounted for more than 60-70% of the world. With the decoupling of China and the United States, Europe and the United States no longer allow Chinese companies to bid for local new energy photovoltaic storage and charging projects. Europe is also imposing carbon taxes on China's new energy photovoltaic storage and charging products. Affected by these impacts, the asset scale of the families in the new energy photovoltaic storage and charging industry has been greatly reduced.

However, in overseas markets, new energy is fully market-oriented and VPP and P2P are permitted. #DePIN, #RWA and #AI of EnergyGPT are very popular around new energy, and on-chain tokenized products are not regional. Therefore, after the upgrade of smart boxes and on-chain tokenization, the green electricity, light storage and charging nodes and charging pile networks of the #DePIN track of new energy storage and charging industry can quickly form a distributed network effect due to the large equipment shipments and installed capacity of traditional industries. It is more advantageous than the pure Web3.0 #DePIN project, so as to quickly obtain the premium and liquidity of industrial tokenization, thus forming a special "hedge". Of course, these tokenized cash flows can also be fed back to the real industry to continue to increase the value of real-world assets.

Activate

Equivalent to the old family, activation is also a key word. As you may know, the capital markets of traditional families such as the A-shares in the mainland and the Hong Kong stocks in Hong Kong are generally through listed companies, but the current stock prices are very bleak and the liquidity is not enough. Therefore, how to revitalize them is a core issue, which also involves the RWA currency-stock linkage model we have discussed before.

The linkage model between RWA and listed companies is generally to first announce the investment in Bitcoin or ETF products, and configure virtual assets in the asset table of listed companies; secondly, release the investment and development strategy of Web3.0, enter the field of virtual assets and Web3.0, and cooperate with market value management; then, further see how to empower their own industries through virtual assets and asset tokenization.

At present, mainland companies are more anxious. One is that the financing channels of enterprises are narrowed and it is difficult to raise money. Another is that the mainland IPO is tightened, and it is difficult to go public. They come to Hong Kong for listing, but the liquidity of Hong Kong stocks is poor, and the market value of less than 10 billion cannot enter the Northbound Link.

So for assets or enterprises like family businesses with good cash flow but lower profits, it is possible to consider issuing RWA in Hong Kong to achieve digital IPO. In addition to corporate bond RWA, equity RWA can also be used, which is equivalent to a new digital IPO, combined with tokenized liquidity design, etc.

Inheritance

The core mission of the family office is inheritance. From the perspective of inheritance, it is no longer just a matter of the second generation taking over, and the third generation will soon be faced. These post-00s are digital natives who have been playing with smartphones, Minecraft's Genesis game, and various electronic products and digital worlds since childhood. It is almost impossible for them to understand the factories and equipment of the manufacturing industry. A large part of the capital accumulation of traditional families comes from the traditional manufacturing industry. It is difficult for the second generation to continue the manufacturing industry, and it is even more impossible for the third generation. They all survive and grow in the digital world.

So, from the perspective of inheritance, the future of the family office must be laid out in the digital world and digital assets. The early days of the Hong Kong stock market 20 or 30 years ago were very similar to the early days of the current virtual asset era. It was also very chaotic but full of vitality, just like a new era of encrypted Hong Kong stocks. At this time, it is necessary to lay out in advance.

We are actively building a series of services for RWA professional investment banks in conjunction with leading institutions and platforms in the fields of Web3.0 and RWA, providing diversified encrypted financing services for high-quality assets and entrepreneurs. We welcome people with lofty ideals to participate in the construction, and you can also add WeChat YekaiMeta to join the RWA practice seminar group to participate in the discussion.