Written by Ye Kai
On June 27, the Web3 Elite Conference - Family Office and RWA Virtual Asset Investment hosted by FinMeta was successfully held at the China-Hong Kong Financial Elite Exchange Center. The guests and friends on site and online friends discussed the related topics of family office and RWA virtual asset investment.
Ye Kai was invited to give a keynote speech on innovative investment allocation of RWA and family offices. Since it was an oral sharing on the spot, the text content was organized and supplemented in combination with the live video afterwards for everyone's reference. It 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 their Bitcoin spot ETFs 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. At present, it is only a short period of half a year. Generally speaking, for example, after a year, the specific data of a cycle will be released, which is required for large-scale fund allocation.
I used five words in my on-site sharing: combination, inflation, hedging, revitalization 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 portfolio. 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% will be allocated to some high-risk, such as new coins, tokens of different tracks such as #AI, #DePIN, #meme, etc. Although 10% of the funds, but the cycle is short and the rolling is fast, it turns around every 2/3 months, but it 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 research insights, often hang out in the community, listen to the 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 investments, such as our film and television funds, a "6-3-1" combination is often adopted, with 60% invested in television programs with relatively stable returns, 30% in movies that may be a hit and have high returns but may also have dismal box office performances, and 10% in short dramas with short cycles and high returns.
In Crypto Fund, a "6-3-1" combination is also adopted, with 60% allocated to Bitcoin or Bitcoin spot ETF products with relatively high liquidity, 30% allocated to quantitative trading of mainstream tokens such as Bitcoin, and 10% allocated to new coins. The cycle of a new token in a hot track may only be a few months, so the investment will continue after the cycle is quickly completed.
In the previous keynote speech, Mr. Zhou from the Bank of Singapore 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 a commercial real estate worth 100 million Singapore dollars in Singapore; the other is that the first generation of family offices in Singapore generally have a more stable investment strategy, while the second generation has a more aggressive investment strategy and has begun 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 Funds. 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, which may be the advantage of Hong Kong RWA.
Inflation
Global funds are beginning to pursue inflation resistance. The current preference of funds has shifted from short-term liquidity to inflation resistance, so high-quality real estate, high-tech, especially AI stock ETFs, and high-quality corporate bonds in the United States have become the first choice for funds. Are there 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 adjusted residential apartments to commercial leases, data centers, logistics warehouses, laboratories and industrial plants, etc. Real estate products, from corporate bonds to ABS fixed income to off-balance sheet REITs, can have different product forms, and can be more flexible when combined with RWA, including share and liquidity. For example, real estate with operating cash flow is more similar to digital REITs, and cash distribution can be more flexible. Traditional REITs generally distribute cash income every year or half a year, while RWA digital REITs can distribute cash every month or even every week or every day. Such products are more attractive in terms of expectations and liquidity.
Cici, president of Yingli Family Office, shared that real estate and virtual assets in Singapore family offices are not tax-exempt. If you invest directly in virtual assets, can you avoid tax burden by indirectly allocating virtual assets through RWA and investing in financial products? In addition, alternative assets such as commercial real estate are relatively large in size, with a 3-5 year lock-up period. Can RWA be more flexible and advantageous in terms of cycle and liquidity?
High-quality corporate bonds are conventional fixed-income products. There is nothing special about them. The yield is not too high. 6-8 percentage points annualized is pretty good. But if we combine the RWA design, can we combine the incremental intrinsic value after tokenization on the basis of conventional annualized yield, the premium of new tracks and new concepts, and the diversified liquidity in the secondary market after tokenization? Will there be new surprises?
Conventional tokenized liquidity of 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, instead of designing dividends, the operating cash flow can be regularly invested in 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 achieving 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 combination 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 not a profit dividend, but an airdrop qualification, 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 by airdropping or exercising rights. NFT can be combined with RWA tokens to realize different modes of combination design.
Hedging
The assets of a family office often come from the family's core industries. The value of RWA lies in the fact that it can form a certain hedge with the core industries of the client family of the family office, or it can achieve value preservation and premium for industries that are beginning to decline, or it can 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's total. 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 marketized and VPP and P2P are permitted. #DePIN,#RWAand#AIof 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#DePINtrack 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#DePINproject, 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, allowing real-world assets to continue to appreciate.
Revitalize
As for the old families, revitalizing is also a key word. As you may know, the capital markets of these traditional families, such as the A-shares in the mainland and the Hong Kong stocks, are generally through listed companies. However, the current stock prices are very bleak and the liquidity is not enough. Therefore, how to revitalize is a core issue, which also involves the RWA coin-stock linkage model we discussed before.
The linkage model between RWA and listed companies is generally to first announce investment in Bitcoin or ETF products, and configure virtual assets in the listed company's balance sheet; 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 look at how to empower their own industries through virtual assets and asset tokenization.
Mainland companies are currently quite anxious. One reason is that the financing channels for companies have narrowed and it is difficult to raise money. Another reason is that IPOs in the mainland have been tightened, making it difficult to go public. They choose to go public in Hong Kong, but the liquidity of Hong Kong stocks is poor, and companies with a market value of less than 10 billion cannot enter the Northbound Connect.
Therefore, for assets or enterprises like family businesses with good cash flow but lower profits, they can consider issuing RWA in Hong Kong to achieve digital IPO. In addition to corporate bond RWA, equity RWA is also available, which is equivalent to a new digital IPO, combined with tokenized liquidity design, etc.
inherited
The core mission of a family office is inheritance. From the perspective of inheritance, it is no longer just a matter of the second generation taking over. The third generation will soon be faced. These post-00s are digital natives who have been playing with smartphones, Minecraft games, 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 traditional manufacturing. It is difficult for the second generation to continue the manufacturing industry, let alone the third generation. They all survive and grow in the digital world.
So, from the perspective of inheritance, the future of family offices 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, which 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.
