Welcome And Guest Setup

SPEAKER_02 0:02

Welcome back to Finance Friends. I'm your host, Fabian, and this is season four. This season we're diving deep into the world of investing. Not just where to put your money, but how to think like a professional investor. We are bringing you conversations with highly intelligent, incredibly motivated investors with weekly episodes. Make sure you stay tuned in. Today's episode on Finance Friends podcast, we had Ryan McMillan. Very impressive. He had the highest performing fund in Australia a couple of years ago at 122% in the year. He's also built out products for the Rolling Stones. And now he runs and co-set up a business called Merkle Tree Capital. And they have a couple of funds, but their main fund is Invest in Digital Assets and Gold. Listen in. Welcome, Ryan, to the Finance Freds podcast. Good to have you in. We're just talking about our one of our previous guests who you know quite well.

SPEAKER_01 1:09

Yeah, no, thanks for having me in, Fabian. Yeah, we're just talking a bit about uh about CJ, who's on our investment committee and does sort of help us wind back a little bit out of the crypto bullishness and and bring a bit of macro perspective, which we found really useful, particularly over the last year.

From Crypto Sceptic To Fund Manager

SPEAKER_02 1:24

And CJ means uh so Chris Judd, which people might not know him as CJ. So um, so it lets you talked about uh your fund. So what where are you from?

SPEAKER_01 1:35

Yeah, okay. So yeah, I'm from I'm from Melbourne, uh from Moynton Peninsula. I live in Sydney now. Yeah. Um started the fund with a friend of mine from the peninsula days. Um, so yeah, uh high school and university friend. Um, he he took a different path to me. He was much more on the tech side. So he had a tech startup, and that sort of got him involved in crypto. And I gone to London, worked in hedge funds and asset management over there, um, much more traditional, and I was quite a skeptic on crypto generally. Um, when I came back, we started to have more and more conversations. And um, yeah, I just sort of found a lot of the things that I thought of the misconceptions I had were were weren't really based on anything real, and I had all these misunderstandings. So um, you know, it was February that I started to um buy some Bitcoin and some Ethereum, and within four months we'd launched the fund. So I took a really, really fast. I went down the rabbit hole, read so much material, and um, yeah, it got and and what year?

SPEAKER_02 2:37

February of which year? So that was 21. 21. Yeah. Yeah, okay. So over five years or five years ago now we're recording. Yeah, that's right.

SPEAKER_01 2:46

So I call it my cryptoversary, was uh it's last weekend, so that's yeah, five years.

SPEAKER_02 2:50

So and and the name of the the company is called Merkle Tree Capital, is that right?

SPEAKER_01 2:56

Yeah, that's right. So a Merkle Tree is a cryptography term, um, and it's how different um values are hashed together and it looks a little bit like a tree, and it's named after a guy called Ralph Merkel. So it's got a bit of a tie-in into the industry as well, and we like the concept, the visualization of a tree as well. So it ties nicely into TradeFire, we think.

SPEAKER_02 3:14

And how many uh do you have one signature fund that you run, or do you have multiple different funds?

Debasement And Why Bitcoin Plus Gold

SPEAKER_01 3:19

Yeah, we've been running one strategy, which is a pure digital asset play for for a little over five years now, and that's done really well. Um and we've recently, earlier this year, we launched a Bitcoin and gold fund. Um we really got into the debasement trade, um, and we think that's that's um going to be an enduring um position to hold throughout the next probably, you know, 10 years potentially. So we thought this is a nice way to get um more investors to dip their toe into Bitcoin, but really dampen the volatility with a big gold position as well, but play on that same thematic.

SPEAKER_02 3:52

So debasement for our listeners that haven't heard, it's been a big term in the markets or finance industry for the last few months now, especially since Trump does what he wants, when he wants, how he wants, or tries to at least. Yeah. So can you explain to our audience what does debasement mean?

SPEAKER_01 4:09

Yeah, I I think it it's been happening for a long time, or the trade has even been happening, but it wasn't, I think it was really GP Morgan who brought it to the fore, which is maybe that six months ago, and started saying, yes, there is a debasement trade, and it is Bitcoin and gold, and lumping those two assets together. Before that, we obviously had Larry Fink talking about Bitcoin being digital gold. So they'll they were sort of being paired together already in that, and then putting the nomenclature on top of debasement, which is really protecting yourself against excess government spending. We know all over the world governments are spending, there's bigger deficits. Um, that creates inflation, is is theoretically what we believe. Um, and and one of the ways to protect yourself is is hard assets like gold.

SPEAKER_02 4:51

Yeah, and and I guess debasement is moving away from the US dollar because you is that is that right? Or because you obviously, or is it more just because um obviously the government can decide to print more money or you know release more treasuries effectively?

SPEAKER_01 5:08

Exactly. But it's not just the US dollar, it's any fiat currency, right? So it's really removing yourself from that sovereign risk where you know indebted sovereigns all around the world, obviously the largest one is the US, and that's where most exposure lies. Um but it turns out the US is probably uh debasing less than a lot of these other countries as well. So um it's you know often referred to as the cleanest, dirty shirt in the in the room. So um, but either way, you know, gold gets you away from that sovereign risk, and there's new sovereign risks now. As we sort of move to something like a bit of a pre-war footing, you can see you know there's trade wars going on, there's some there are some actual wars going on, um, there's a tech war going on potentially. Um we saw the US cancel some Russian treasuries or some Russian-held treasuries, and that's where the real sovereign risk starts to come in. Other countries see that and say, Oh, that country can cancel my treasuries. Why can't they cancel gold or Bitcoin?

Correlation And Tokenised Assets Explained

SPEAKER_02 6:01

Yeah, and that's the key. Like if there's only well, Bitcoin is only limited supply and and gold, obviously, it takes time to dig it out of the ground. Yeah. Yeah. And it's to the store of value. Yeah. So so what's the correl is there a correlation between Bitcoin or or digital currencies and gold? And is that is that correlation changed a bit over the last six months or so?

SPEAKER_01 6:26

Um let's just talk about Bitcoin for a little bit because the rest of crypto is trying to do something else. So that they are there are some gold there there are some Bitcoin-like competitors in the crypto space, but for the most part, it's all most of it is trying to do something else other than be a store of value. Um what there's a couple like um Zcash or Monero, which are privacy-oriented. Okay. Um, and so they have more privacy on top of their transactions and they have a similar supply schedule. Um, but for for gold sorry, I just forgot the question now. I've gone off on a topic.

SPEAKER_02 6:58

Oh, the correlation picture.

SPEAKER_01 7:01

Yeah, yeah. Exactly. So so if you zoom out, there's a really good correlation. Um, they're both going in the same direction, and I think we would have all seen lots of charts last year of oh, the gold is going and Bitcoin will follow, or M2, global M2 is increasing and gold will follow and Bitcoin will follow. Um, but in the shorter time periods, they're actually pretty negatively correlated. So that's why we put them in a portfolio together. You can sort of arbitrage one will typically run first, and whether you say gold or Bitcoin is going first, it doesn't really matter. They are one's sort of like a risk-off debasement hedge, and one's a risk-on debasement hedge. So they can perform differently, and that's why we think they're really complementary together. But zoom out, and that they're both sort of traveling in the same direction.

SPEAKER_02 7:40

Okay. And in terms of your fund specifically, uh, do you only invest in in Bitcoin as a cryptocurrency, or are there other currencies that you invest in? And are you do you call them cryptocurrencies or do you call them something else?

SPEAKER_01 7:54

Yeah, we we like digital assets. I think the world's sort of moving in that direction. Crypto can have a little bit of a negative connotation with it. Um, and a lot of people in the industry would put Bitcoin outside of crypto or cryptocurrency, although they're all cryptocurrencies, they're all cryptographically um secured. So um technically they all fall under that umbrella. But there, yeah, there's there's different people with different views on on where that sits. I think cryptocurrency is fine, or digital assets is really where we're moving to. And that sort of starts to include things like stable coins. Um and these are assets sitting on a blockchain that can move digitally, therefore, you know, at the speed of light effectively.

SPEAKER_02 8:29

Yeah, okay.

SPEAKER_01 8:30

And so our funds, yeah. So back to our funds. Yeah, so the Bitcoin and gold fund, that's Bitcoin and gold only, those two assets, and that's it. Where the digital asset fund that gives you um access to a broader um range of thematics within the ecosystem. So things like Solana and Ethereum, they're infrastructure plays, if you will, on which things like stable coins, and even now we're starting to see um more digital assets like gold is also now being tokenized, and we're seeing equities being tokenized. So you can trade a Tesla share, we can send them to each other on our on our wallets, or we can buy it over the weekend trading 24-7. Um and these are sort of really nascent stage, but um really starting to showcase the dream of what crypto and digital assets can mean and do.

SPEAKER_02 9:12

So when you say like you buy the tokenized version of a Tesla or gold, what does that what does that mean? Can you bring it back into layman's terms?

SPEAKER_01 9:23

Yeah, a nice easy way to think about it is like buying an ETF. It's sort of like this is the wrapper through which you're you're purchasing it for the gold that we hold in in a tokenized form that has designated gold bars in London in in vaults the same as you might find through an ETF. So the chain of ownership is exactly the same, or very similar at least, um, and we can go and change our tokens for actual physical gold if we want to. So we have the right to do that.

SPEAKER_02 9:51

So, okay, so it's just just effectively holding it in, but you just don't hold the physical. Exactly.

SPEAKER_01 9:56

So it's much easier to transfer, and that's sort of that that that um layer that sits in the middle that makes it a lot easier.

SPEAKER_02 10:02

And how do you decide the holding of like gold versus your Bitcoin? And it is it just like physical gold through ETFs, or are you uh buying gold companies?

SPEAKER_01 10:18

No, so that's right. So we're we're just a direct commodity play on this, so we're not looking at getting involved in equities, be they um miners or or even be they you know circle or coinbase. We're not doing an equity play, we're going straight to the source, right? Not not proxy trading, if you will, we're going direct to the the actual commodity, if you like, um which is digital in some form.

SPEAKER_02 10:38

Yeah, interesting. And and how Hugh talks a little bit about the fun. Obviously, he's got been running for uh well five coming into five years now. What's been your biggest learnings over that period?

SPEAKER_01 10:51

Yeah, each each um these famous, infamous crypto bear markets are um pretty, pretty well known to be pretty brutal. Um, 80% drawdowns. We're we're currently in the the middle of one. We think we're probably down 50-ish percent at the moment. Um, they do sort of have a diminishing returns profile. Um, the the market structure has been higher highs and higher lows. So we're zoom out, we're in a clearly in a you know a bull trend and adoption trend. Um and that that's that's certainly moving in the right direction. So so for us, it really is about, you know, for us to work well in this space, we have to be really high conviction um and to be able to get out of the way. And and you're saying, you know, gold and and bitcoin and and digital assets, those digital assets are typically much more higher beta. So at times like this, we want to be rolling risk out of the portfolio and into gold, and that's what we've been doing over the last three months to sort of um you know take a little bit of that risk and volatility out of the portfolio and then look for signs of a bottom, which we think will be happening over the next few months, and start to like.

SPEAKER_02 11:54

It ultimately gives you the levers that you can pull if you feel that there's um you know momentum and if you're close to the bottom, then you can allocate more to gold, and and if it's the other way around, then you can allocate more to Bitcoin.

SPEAKER_01 12:07

Yeah, so we call the risk overlay. That's right. So we're looking at sentiment data, we're we're looking at on-chain data. On-chain is a is a new science, a new data science, if you will, that's specific to crypto. So we can see real-time transactions happening on-chain, and you can see where all the activity is.

SPEAKER_02 12:22

Yeah.

SPEAKER_01 12:22

Um, at the moment, you can see there's 110 million transactions a day on Solana or on average. So that's really high for what looks, which is a bear market, where you are in a bear market, but there is a lot of activity happening, and that's much higher than it was, you know, in 2022. Um, so that gives us a lot of a lot of um confidence that the fundamentals are still good. Um, we look at macro as well. Macro is a really big part of this. Obviously, Bitcoin is clearly a macro asset these days, and that follows the broader markets. Um, and we do a little bit of TA as well. So I think TA can help you be a little more um tactical as well. So, yeah, we we combine all those things together and sort of give ourselves a risk weighting, and that's where we sort of go implement the portfolio on that basis.

Fund Returns Flows And Investor Behaviour

SPEAKER_02 13:03

Yeah, so TA for our listeners is tactical allocation where you can be a little bit more flexible. Yeah, technical, technical. Oh technical, sorry, sorry, yeah. Um awesome. Thank you for sharing that. So uh and how much of you, you know, where is the fund at in terms of asset size? And I imagine that sort of fluctuate up and down depending on sort of market cycles.

SPEAKER_01 13:24

Yeah, it does. We get really good inflows, obviously, uh those those more euphoric stages of the market, um, which is a shame. That means you know, investors are buying the top, and this is pretty synonymous with with Bitcoin as well. You always hear the stories of people um, you know, buying the top and sort of selling the bottom as well after 12 months of of downward, you know, of poor returns. They they sort of capitulate and that signals the bottom and up off it goes. So um, you know, our return flows uh, you know, along those lines. Um when we launched in 2021, everybody we spoke to invested. We were like 100% strike rate, and we got five, six million really quickly, went through a bear market, that was pretty tough. Then we got back over 25, 30 mil, you know, about 12 months ago, and that's been our little bit of a decline as as the market sort of softened a little bit. Um, and we've had some great returns in that time as well. We we were the best performing fund in Australia um across all funds and and all asset classes for 12 months and top three um for two years running as well. So um, you know, we got some nice coverage in the AFR over that.

SPEAKER_02 14:25

Yeah, I did see that. So you returned over a hundred percent in one year, is that right?

SPEAKER_01 14:29

Yeah, 128% in one year and 107 in a in another year, consecutive year, so 23 and 24. Yeah, well, congratulations.

The Bitcoin Halving Cycle And ETFs

SPEAKER_02 14:38

Well done. So um, and uh I saw a chart actually the other day around the return of I don't know if it was Bitcoin specifically or other uh digital assets, that every four years there seems to be a big drawdown. Yeah, how much does that play on the investor's mind? And as soon as it hits 1 January or even 25th of December, you put some money in because knowing that year five or year one again of the cycle tends to be bullish.

SPEAKER_01 15:11

Yeah, that that four-year cycle um it is associated with um the Bitcoin halving cycle. So every four years, the emissions of Bitcoin uh are cut in half. So the miners, there's a mining um cohort who are printing blocks of Bitcoin. That's every 10 minutes, all the transactions will be wrapped up. One person will get to print that block and and move on. They get a reward for doing that. Those rewards are halved every four years. So that's why we see these really strong four-year trends. Um so we had another peak right on right on schedule, October last year. That was like clockwork. Um I think a lot of people in the industry, including us, had expected those four-year cycles to weaken a little bit as more and more institutional money comes in. We've seen a lot of flows from these ETFs, um, and they're more advised um clients and and more institutional clients who who will have you know a 2% allocation if if um the market underperforms, then they're gonna have to top up. And we think that takes volatility out of these moves. Um, but nonetheless, they're still a lot held by the OGs, if you will. Um, and they're the ones who uh who are following these four-year cycles more more accurately than others.

SPEAKER_02 16:23

So do you know the breakup of institutional investors versus retail investors in Bitcoin?

SPEAKER_01 16:28

Yeah, so uh it's hard, it's hard to see through obviously everything, but I can tell you in in ETFs and in companies like MicroStrategy and other um digital asset treasury companies, it's around 12% of the market is now in those. So we think that's that's fair to call that more institutional, yeah. Um, often through advice channels. Um, but then there's obviously, you know, the US government has 300,000, there's a bunch of sovereign wealth funds who who are not included in that cohort. Um, so yeah, you you could sort of speculate it's a little bit higher than that.

SPEAKER_02 16:58

Yeah, and obviously the the more likely, the more the increase in uh adoption from wholesale and and institutional investors means the volatility should should reduce because as prices go down, people will will top up to rebalance that asset allocation or or see an opportunity to invest at lower prices. Yeah, whereas on the retail side, people do a bit the opposite. When markets have gone up, that's when they invest.

DCA Psychology And Entry Points

SPEAKER_01 17:22

Being contrarian is not easy. Yeah, absolutely. Um yeah, so so um and we think we're in that that sort of bottoming sort of phase at the moment. Um so we think, you know, if the four-year cycle continues to play out, then in October this year, that will be, you know, around the bottom, and we probably track sideways from here to there, meaning, you know, DCAing through that period will get you some great entries and you'll be set up for you know a typical bull market that goes into the next halving cycle. So um, you know, it's a little bit too simplistic sometimes because there's a lot more macro at play, and this is a macro asset, but at the same time it's worked and it continues to work. So, you know what, the cycles are true until proven otherwise. Yeah, exactly. Right. DCA for our listeners, dollar cost averaging, I assume. Yeah, yeah, that's right. It's you know, um my first role out of uni was in financial planning as a power planner. So we talked about DCA there, and at that point I thought, this doesn't make any sense. You want to position, get in there, you know, just hit up. But in an asset this volatile, DCA makes a lot of sense. Yeah, yeah.

SPEAKER_02 18:20

I think there is research around DCA, and it's actually because assets go up. So that your probability of over the long run, your probability of of you know, if you are dollar cost averaging, it actually doesn't it benefits you less than investing all in one time. Yep. But it's also about you know psychology as well.

SPEAKER_01 18:41

And there is, and and the volatility of this asset class particularly, I think, makes it, you know, more uh beneficial, certainly.

SPEAKER_02 18:48

Yeah, it's interesting. I've had some uh asset managers on and I listen to a lot of podcasts, and uh when you know shares that you have been watching that you know or or digital assets um you know have been sold off substantially, there's an opportunity to buy. So, you know, if it goes at you want to buy it at$20 a share as an example, um and it's at$22. If it goes down to$20, then you want to buy it and you buy it. Now, if it goes down to 18, if you're willing to buy at 20, you should be willing to buy more at 18.

SPEAKER_01 19:20

Absolutely. No, no, and we certainly see that with Bitcoin. If you like it at 100k, you should really love it at 50 if it gets there or 60 when you know it's around now.

SPEAKER_02 19:28

So um where do you see it going? And and how does the because obviously Bitcoin is um you know, Bitcoin to USD is the is the the number that we see and and relate to. And with uh depreciating USD, that's obviously worse for for Bitcoin. Do you do you guys talk about where you see the floor for this year? Now we're in February, there's a long way to go. Um is that discussed internally? Do you publish any of that uh research externally to the market?

SPEAKER_01 19:58

Yeah, we we don't like to put too many um you know dollar predictions out there because they're always wrong, right? And and people come back and say, look, you said this um and this happened. But it you know, we're putting more faith again in the four-year cycle. And if you just want to step back and say, look, that that is what is driving the market currently, and it does look like it is because the fundamentals are still really strong. Like I said, there's a lot of transactions still happening. Um, you you've got central banks even starting to buy little bits of Bitcoin in experiments. So the fundamentals are really good. Um, so let's just pretend for a second that the four-year cycle plays out, then you should expect sideways chop from now until October, and then and then a um uh you know a recovery bull market, and then you know, one of these blow-off top, which are really exciting. So um can we go down to 50-ish? You know, that's certainly possible. But equally, you know, could we rebound from here very quickly? We didn't really get a blow-off top in the last bull market, so you know, we just got a few all-time highs, a little bit higher, a little bit higher, but none of that really parabolic move that we've seen in previous cycles. So potentially we think there's also, you know, a pretty good probability that this bear market follows that suit and is not quite as steep and probably as long as as previous ones. So, you know, it's balancing those two, those two.

SPEAKER_02 21:11

And for any investors that, you know, may have not tipped their toes in the water, so to speak, in in in digital assets, what would you say to them to maybe give it a short as to why you feel you know so strongly about digital assets?

SPEAKER_01 21:28

Yeah, I think I think the best thing to do is to actually dip your toe, get a small position, and then you will pay a lot more attention to the asset. Um that there's no way better of learning than doing. Um, and equally that's that's how I started my journey myself was you know, put a thousand dollars into to Bitcoin and Ethereum, and I started to read more about it. Um, and that was in a bull market, which is helpful. So that went up very quickly, and and then you pay a little more attention. Okay, well, what is this asset that that I'm actually holding as opposed to sitting on the sidelines? It's quite easy to take the negative view because you're actually out and emotionally you. You're sort of looking for confirmation bias to say don't buy it when you're when you're out of the market. So I think take that little position, start to be curious and and learn for yourself. Um I agree.

SPEAKER_02 22:11

Once you've put some money into something, you're more likely anything, you're gonna research it more and and look into it more.

SPEAKER_01 22:18

And then yeah, yeah. And don't listen to anybody who starts a sentence with, I don't understand Bitcoin, but you know, and that that's you know, Michelle Bullock is one of those, and there's a lot of people that that sort of go down that path. I I don't want to know what it is, but I'm gonna tell you what it is. Like, well, you know, that's that's not a great starting point.

Ryan’s Career From Melbourne To London

SPEAKER_02 22:34

Yeah, I've like, you know, the way I look at it, you know, you might even lose money on your first investment, but if you learnt something about investing, you've gained a lot more than the money you've lost. Absolutely. Yeah, so that's my and and let's I'll take a step back because you talked about working in in in in traditional investment management or hedge funds. So, where did you start your career? Maybe let's not go back to paraplanning days, because I I did a little bit of work in paraplan, I hated it. Yep. But uh let's go back to what was your your first role in a in a big institution?

SPEAKER_01 23:08

Yeah, so after a little bit of paraplanning, I was about 12 months out of uni. I was actually part-time at uni doing that, and then um I moved over to MERSA here, um just across the road, um where they were then anyway, um, into MERSA Global Investment. So that was you know very operational, and that was you know, getting data together in spreadsheets um for the funds, and then a little bit of product management on the side as well. Um then I moved to the UK pretty, pretty, you know, after a couple of years of that, and and you know, really carved out my career in product management and product development, yeah. Um, which is probably a different path for most people to get to CIO with with MERSA? No, that would that so then moved to some UK firms, um Bank Saracen, so a big private banks um London investment firm. Um it's a really interesting place. My first job there was actually creating a fund for the Rolling Stones. So they had some really high-profile clients there, and that was my number one job in the door.

SPEAKER_02 24:00

So when you say creating a fund for the Rolling Stones, let's let's bring that back. Is that are you is it a royalty fund like for their for their songs, or what does that mean?

SPEAKER_01 24:11

No, so it's just investing their money, but it has to be in a certain structure. In the UK, you've got so many choices of where you can domicile the fund and the tax implications of that. So they weren't in a specific place with um, you know, specific owners, obviously, um, and and you write for the right tax benefits. So a lot more structuring happens in in the in the UK. Um and so that was a big part of what I did. And then it was also looking at you know really new strategies as well, which is something I was always drawn to. It would be like catastrophe bonds, it was a really cool product to get involved in. Um, I brought risk parity funds to the UK as well. So um Panagora, I was I was always a big fan of Ray Dalio and his old weather fund. I came across that early in my career and going, wow, how cool is this? Okay, and sort of start to understand it, and then was lucky enough to actually bring those um that strategy, the first people to bring that to um the UK and and some other really cutting-edge stuff that I found really interesting, which is probably what you know led me to keep an open mind into Bitcoin as well. Yeah.

Catastrophe Bonds And Diversification

SPEAKER_02 25:06

So um you talked about an orb weather fund and catastrophe bonds. Actually, one of our clients um uh they distribute a US uh fund that that does catastrophe bonds. Can you explain to our audience what a catastrophe bond is? Yeah. Because if I do, I'll get it wrong.

SPEAKER_01 25:25

No, no, no. Yeah, yeah, we call them cat bonds or you know, catastrophe bonds. So this is a fund, and it's effectively you're taking away the uh market risk of the bonds. You're now uh the the risk you're taking is catastrophes happening around the world. So an insurer who insures people for catastrophes, cyclones or whatever they might be, flooding, um, they will put some of that risk with the fund and the fund will work. So your returns are really good if there's no catastrophes through the year. And if there's a lot of catastrophes, your returns aren't so good. So different no market risk or a different, very, very different risky. So you become the insurer ultimately. That's right. You're reinsuring, you're part of the reinsurance business. And you've got some really uncorrelated asset there.

SPEAKER_02 26:06

Yeah, which is which is really good. Um, you know, if you want to hire your winning product. Yep. Um, but obviously bearing the risk of something like this can happen and might take away some of that return.

SPEAKER_01 26:19

I mean, the the the the primary thing you're trying to do here in portfolio construction is bring together uncorrelated assets and that will enhance your risk-adjusted return. That is you know the bread and butter of portfolio construction. So anytime you find an asset that has non-market correlation or non-perfect market correlation, it will enhance the portfolio. Um and Bitcoin ticks that box perfectly for us, so do you know a bunch of other.

SPEAKER_02 26:41

Yeah, so obviously your time in the UK with these with these funds, you know, caps you to understand looking at different asset classes that give you all different investments, they give you a positive return but uncorrelated. So, you know, if if global equities sells off, you know you're still your your cap bonds or your BTC and your gold fund is is doing well. Yeah, exactly.

SPEAKER_01 27:06

And that helps the portfolio over the long term.

International Growth Plans And Time Horizons

SPEAKER_02 27:08

So and and what firms did you work at? So I've got Coots listed. Did you spend some time at Coots Bank, the Queen's Bank, as some would say?

SPEAKER_01 27:15

Yeah, His Majesty is now, but Her Majesty is there when I was there. Um so that was really interesting. I think anybody and everybody who is someone in the UK banks with Coots, it's sort of like a household name there. But you know, all the Premier League footballers, all royalty, all the CEOs, everybody, you know, sort of banks there, and they want to be there because uh Her Majesty is there. And she'd occasionally come in for lunch and we'd wave at that they uh at the at the door to see her come in. Yeah. Um so that was a really interesting place to work. Um, they had some really old funds there, and I helped update those to bring them into a new structure um and and and new investment profiles to to uh um better suit uh you know the go forward model because a lot of these funds were 40 years old and you know had a long history, so they needed a bit of updating. Um and that was part of RBS Investment Bank as well. So I did some work for them bringing their structured products um in into um existence as well.

SPEAKER_02 28:09

Yeah, because structured I I spent some time working in private banking in the UK, Julius Bear, Swiss Private Bank. Um, and structured products were were very popular with our audience. I think become uh the bank has a bit uh uh taking a little bit more risk, uh sorry, less risk or risk off with those products that they're providing to their clients now. But yeah, it's quite unique with with their offering and then different products that are available in the market in the UK.

SPEAKER_01 28:36

Yeah, that's right. There's a lot more choice and and uh and um yeah, a lot more innovation happening over there than than we typically get here. Um there's lots of great things happening here, don't get me wrong, but yeah, there's just a little bit more happening in in that sort of center. There's so much more pools of capital that are that are looking for a home over there.

SPEAKER_02 28:54

Yeah, when I when I worked in uh Julius Bear in London, we used to look after a lot of um Middle Eastern clients actually. And for them it was just you know getting assets out of the Middle East because to mitigate mitigate risk of something happening, and then at least they have assets elsewhere in a in a safer country. Yeah. Um that's great. And so how long did you spend in the UK in total?

SPEAKER_01 29:12

Yeah, 10 years. Ten years in total. Yeah. So I got citizenship there, and and that was sort of the catalyst. Okay, if I don't go and try move home now, then I might be stuck here for for a while. So I thought, you know, well, let's try it now. And that was just after um the the Brexit vote as well. So things were getting a little, you know, um what would you call it? Um there's a little bit more conflict, I guess, and um, you know, a separation between the London and and the rest of the country. And um, yeah, so either way, it was a good time for me to leave, and I sort of left just before COVID as well, which was which was probably good to get home and have that in Sydney was a not so bad experience than in some others. Yeah.

SPEAKER_02 29:50

If you especially if you're you know short distance with is within the beach or distance of the beach, at least you can go for a swim.

SPEAKER_01 29:57

Yeah, we used to go surfing, so it was that was not not not so bad, right?

SPEAKER_02 30:01

Yeah. So then you you so you came back, and then as soon as you came back, you set up the company or were you working?

SPEAKER_01 30:07

Yeah, I did I did a couple of years here. So one was with um BMP Parabar in Sydney, and then with AMP Capital as well for a year. So I worked on some projects with them. Um and during those times just having these conversations with Dean, and I was quite skeptical at first, but it did um, you know, eventually put in the time to sort of understand what he's talking about and whether he's actually got a got a point here, which um was yeah, absolutely. If you don't put in the work, you know, you're not you're not gonna have the conviction either. Um, you can't just buy something without the conviction and expect to be able to hold through a bear market.

SPEAKER_02 30:40

Yeah, I agree. Um and where do you see the the business going? Do you plan on releasing more products? Are you do you have international investors as well, or is it just domestic at the moment?

SPEAKER_01 30:51

Yeah, we've got a handful of internationals. Um, we're talking to Singapore and Hong Kong. They're they're sort of you know the local area and mostly family offices there. Um you know, we we're all looking also looking at a Cayman structure as well, so that would really help with international distribution. Um International investors don't really love an Australian domicile wholesale unit trust, which is what we run at the moment. Um that's great for the domestic audience, which has been our bread and butter. Um, we get a lot of self-managed super fund investors come through because it's it's a nice way for them to get good managed exposure to the ecosystem without having to press the keys themselves or decide what to invest. Um, so so there's certainly scope for us to to go internationally a little bit more, um, but we need to have you know that strong base here. And that's what you sort of do during the bear market is sort of build those those um contacts for when things pick up a little bit, you're ready to go.

SPEAKER_02 31:43

Yeah, and a lot of these uh institutional type investors will will do due diligence and it might take you know six, twelve, eighteen, twenty-four months before they're comfortable with you and and to allocate capital to you. And in terms of your VSA, how long is the average, what do you recommend you invest for a five-year period minimum? Is that sort of the the goal? Obviously, it's not a lockup, it's access, do you have give access to to capital if someone wants to withdraw? But your yeah, what do you what do you recommend for your clients in terms of tenure of investment?

SPEAKER_01 32:14

Yeah, so we've got monthly liquidity, so you can come in and out at the end of any any month, um, which you know we don't like the concept of lockups. Everything we invest in, we don't go down to the VC route, so there's no locked up or um capital restrictions on anything we invest in. We we sort of focus on the top 50 to top hundred of our sets, so everything's nice and liquid, and we think that's you know the safest place to bet. There's a lot of a lot of returns still in that space without having to go out the risk spectrum. Um and in terms of um individuals, uh the IM suggests five years, but we think a little bit longer is is is preferred. Um, you know, you've clearly got these four-year cycles, you at least want to write out one of those as a minimum, and ideally two. But most most of our investors are in for the long term and they're thinking 10-year plus, and we think that's the great way to do it.

SPEAKER_02 33:00

And I think if uh a lot of your investment investors did get in 2021, 2022, they've had the 100 plus percent year. So, you know, it's difficult when someone looks at the you know 122% and and you know puts money in, and then you know, you might have a negative year, then it's well, you know, you're almost better off waiting for the negative year than then putting money in. So definitely.

SPEAKER_01 33:23

And that's the DCA approach as well. So through 2022, those people that did, you know, stop up, top up, top up, they really came out of it really strong because they got really good gains on the on the back end of it. Um with the ones that just sort of rode through, they did okay. But that you know, if you can get some really good entries, you bring your average price down. Yeah, um, that that's really good strategy.

SPEAKER_02 33:40

Yeah, and we had a another guest on the podcast earlier in the year, uh, who works at AMP Super, and he said they've just started allocating um to Bitcoin for their super funds, so which is really insightful and learn a lot about uh blockchain.

SPEAKER_01 33:56

But I do know some of the guys at AMP, um, and they uh yeah, really happy with what they're doing, really pushing the envelope there and and starting to get a little bit of Bitcoin exposure. Um most other super funds are not there yet, but you need one trailblazer. Yeah, they're slower uh adopters to super funds, that's for sure. Yeah, absolutely slow to move. So and that's that's true of all traditional finance, right? It's a lot easier to um wait for someone else to trail, you know, cut that path. Um we're seeing it happen in the US a lot more as well. Regulations obviously moved on in the US a lot. Um, and those bigger, you know, Morgan Stanley's and the like are suggesting recommending two, three, four, five percent exposure to to Bitcoin. We're not here here, we're not there yet. But I do think in the next year or two we'll start to see that become the norm. Um, and and you know, small allocations will be quite reasonable.

SPEAKER_02 34:45

Yeah, I think so too. And and you know, we'll see how the next 12 months plays out. So I won't ask you to give me a number on Bitcoin uh for the end of the year, but I reckon what do you reckon? Maybe December, let's go with 75,000 US. Should we go with that? That's happy with that.

SPEAKER_01 35:03

Well yeah, I a little higher, I think a little higher. Yeah, I'll just do that.

SPEAKER_02 35:07

So as a recording, what about 62,000 together? Yeah, 62,30 yeah, I think so. At the moment, so this is on the the 24th of February, but we know that can change pretty quickly.

SPEAKER_01 35:18

No, that's right. I wouldn't be surprised if we had a bit more of a leg down or a little bounce, and but definitely some sideways chop should be the base case. But I think we'll come out of this really strong like we had every other time. So now is the time to start dipping your toe and sort of learning the asset.

SPEAKER_02 35:33

That's uh and uh and your funds are only available to wholesale investors, is that correct?

DeFi Yield Ideas And Closing

SPEAKER_01 35:38

It is, yeah. So it's wholesale only. Um, you know, it is volatile asset, so we think that sort of makes sense. You can get ETF exposure as well for for smaller amounts for people that want to dip their toe, and that's a really good way to not have the custody concerns. And we think we you know we can add some more alpha on top of that when when people get there.

SPEAKER_02 35:53

Yeah, well, it's been in I've enjoyed the chat, Ryan. Thank you. Is there anything else you want to share with our audience? I'm looking forward to the growth of the business and um hopefully see another 100 plus percent yeah.

SPEAKER_01 36:06

No, we'd love to love to get some more more coverage like that. Um, you know, that's that that sweat-earned um coverage in the media is is the best. Um yeah, no, stay tuned. We think there's more funds and there's this concept of uh digital equities as well. We're sort of thinking about maybe there's something we could do there that's really interesting, a few different fund ideas, maybe a a yield fund as well. So we've got plenty on the table. We want to expand and grow and um yeah, to do some more.

SPEAKER_02 36:29

Because here's so let's touch on that. Because um can you generate income from borrowing crypto assets? Is that right? Is that the one? Yeah, absolutely.

SPEAKER_01 36:40

No, that there's$500 billion locked up in in DeFi at the moment and doing all sorts of things like that, generating yield somehow. You know, you obviously take a little bit of custody risk with that, but it's about managing that. And it's a replication of everything we see in in traditional finance is happening in in digital finance with some new things added on, which are really exciting.

SPEAKER_02 36:59

Maybe that might be for our next episode. Sounds good. Thank you very much, Ryan, for coming in. It's been a pleasure. Um, all the best. We'll we'll share all the links to to your fund as well on our on our podcast and on our socials. And we wish you all the best for the next 12, 24, 36, 48 months. Awesome in advance. Thanks, baby. Cheers. Thanks for listening this week. Stay tuned for our next episode and keep up to date with us by following the Finance Friends podcast on Instagram and TikTok plus connect with us and our guests over on our LinkedIn page, all linked in the show notes.

SPEAKER_00 37:39

Disclaimer This podcast exists for informational and entertainment purposes only. The personal opinions of the speaker and guests do not represent the view of any other party. If this recording contains reference to financial products, that reference does not constitute advice nor recommendations and may not be relied upon.