“If this is a game of trust, nobody should put their faith in a crypto king rather than a banker with a direct line to myriad liquidity providers — including the central bank— and the protection of deposit insurance…….The lesson to learn from FTX isn’t just that opacity is bad, but that all crypto is a deeply interconnected ecosystem in which assets are created without relation to real-world wealth and then used as collateral to further inflate what boils down to a single, enormous credit risk — crypto itself.”
— Jon Sindreu, Wall Street Journal columnist, Heard on the Street
Crypto “assets” have come back to the foreground over the past few weeks on the back of the high-profile collapse of FTX. We can’t say that we are surprised, given the string of high-profile failures during the past year. The lack of regulation and opaque jurisdictions are some of the drivers behind this, but, in our view, the key problem for cryptocurrency which is unlikely to be resolved, even if the industry is better regulated, is the lack of value creation. Ultimately all investments are founded on the principle of channeling funds into productive assets which can generate a positive return on the said investments. Whether that’s purchasing public equity in large listed companies, which are expected to generate quarterly profits, or funding SME invoices to allow them to fund their operations and generate incremental revenues to service their obligations. When it comes to crypto the only thing driving returns is more investor demand to purchase it with no underlying ability of the “asset” to generate incremental value. While in the short-term the price volatility can create the illusion of value creation, long term, unless a productive use is found for the underlying “coins” the asset is worthless. We therefore continue to focus on funding value creating assets, while observing the crypto space from the sidelines as a curiosity.
In other news, Sudha Bharadia (Co-CEO) attended the invitation-only 2022 Gender Smart Investing Summit in October in London. The ‘Traction to Transformation’ event brought together 300 senior investment leaders, intermediaries, gender experts and entrepreneurs from over 50 countries across both developed and emerging markets — to kickstart a new era of sustainable, gender-smart investing. Against a backdrop of social and economic turmoil, the summit explored key themes vital to shifting internal culture, teams and investment processes, changing not only who we invest in and with but how we invest, and shaping wider financial systems in service of a more equitable world. The event was exceptionally well-organized, containing lots of workshop sessions and inspirational key note speeches.
Separately, we also attended SOCAP in San Francisco, the four-day event held in San Francisco saw thousands of social impact enthusiasts gathered from across the world to discuss diverse topics — from delivering equity and inclusion to reimagining solutions and power and capital. The forum delivered on its promise of asking the big questions and bringing people together to move towards solving them.
If you would like to consider a fund investment, please contact me at your earliest convenience.