Former CEO of HEP, Tomislav Šerić, and cryptocurrencies. At first glance, it may seem incompatible, but Šerić received the green light from Hanfa last week for the fund he founded, which will invest in Bitcoin. Griffon Asset Management from Osijek is serious; the team following Šerić has set a goal to raise at least one million kuna in capital, and the management of this high-risk, open, alternative fund has been taken over by former Morgan Stanley vice president and finance professional with long-standing experience in the industry in the USA, Feđa Krivošić. Alongside him, as a board member of the new fund, is the founder and director of the domestic startup Orqa and former president of two investment funds (one of which is the state Capital Fund, editor’s note), Srđan Kovačević. The investment strategy of Griffon is to be exposed to Bitcoin up to 100 percent of the asset value and actively not seek to reduce that exposure.
– Bitcoin and cryptocurrencies represent a growing market that is becoming increasingly regulated worldwide. This fund will be the first to allow qualified and institutional investors exposure to this asset class. Many of them have not had an easy way to invest in Bitcoin until now, so we expect sufficient demand for such a product, says Šerić.
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But why digital currencies?
Digital currencies based on cryptography have existed since the early 1980s, and Bitcoin is the first and oldest decentralized cryptocurrency that represents a kind of gold standard in the crypto world. Most cryptocurrencies use blockchain technology, which is inevitably emerging and becoming increasingly accepted. We can see this in the examples of the USA, Switzerland, Germany, France, and Japan, where acceptance and application occur primarily in the financial sector, but also in other segments such as logistics, copyright, software development, and many others.
The fact that on one hand cryptocurrencies are finding increasing practical use, and on the other hand, regulators worldwide are increasingly accepting them indicates that a growing number of users and investors will gain access to cryptocurrencies. Furthermore, in the financial press over the past few weeks, we can increasingly read analyses offering theses about a possible return of inflation, as a consequence of fiscal and monetary measures being taken to mitigate the economic effects of COVID-19. Given the deflationary nature of Bitcoin, whose supply is limited, a potential return of inflation could increase demand for products like our Fund. Regardless, we expect that the demand for financial products like the Fund we established will grow in the long term.
What are the plans and how to reach one million kuna in capital? What is the realistic timeframe for raising these funds?
We do not expect problems in raising the first capital. On the contrary, we believe we could raise much more than the minimum value we now need to meet. However, we are aware that we are an investment community that has not yet had the opportunity to be exposed to such investments, so at the very beginning, we believe we must take small steps, regardless of potential interest, and at this stage, we focus on ensuring the highest possible level of trust among all stakeholders.
Feđa Krivošić is on the team; he has an impressive CV, having come from Morgan Stanley, which speaks volumes about the seriousness. How did you attract him?
Feđa spent over 10 years in New York, has firsthand experience, and has witnessed the emergence of various markets, as well as participated in creating investment strategies in such markets. This is a rare opportunity to participate from Croatia in the very beginnings of such a market where one can have global access from a local level, which he also recognized.
High risks are involved; who is the fund intended for? Do our investors have such a risk tolerance?
The fund we are establishing is intended exclusively for professional and qualified investors who must be aware of all the risks we intend to strongly emphasize, given that it is still a high-risk investment. However, our fund will not be intended solely for investors from Croatia. Regarding risks, we are witnessing various disruptions in all markets, further caused by the completely unexpected virus epidemic that created a unique situation where, at one point, even oil had negative prices. We believe that there is a certain demand at every level of risk, including this highest one.
Why would anyone buy shares in a fund that invests exclusively in one security? Why not just buy Bitcoin directly and skip paying various management and custody fees?
Institutional investors often cannot invest in Bitcoin directly and this way, they will be given exposure to this type of asset for the first time. Additionally, the operational risks of investing in cryptocurrencies (primarily in terms of computer and physical security) are not trivial, especially when it comes to larger amounts of investment. We believe that the market risks of Bitcoin are sufficiently high, and investors do not need additional headaches from the operational risks of holding cryptocurrencies, which have no upside.
In collaboration with the Depository, we have implemented a custody system for cryptocurrencies that results in a significant reduction of operational risks of holding cryptocurrencies compared to the level available to the average investor. The system we have implemented was developed to achieve a level of computer and physical security comparable to the standards expected in the banking industry. We believe that such a level of security is currently not available to most qualified and professional investors. We consider the cost of investing in the Fund to be more than a fair price for mitigating these risks, and that investors will be willing to bear that cost.
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