New Asset Classes, Real Returns Where Investment is Delivering

Today is the alts forum. So sort of preparing this conference, I was questioning myself, why do we actually use that word alts or alternative to describe those asset classes? So I made some quick research went to the dictionary to understand the origin and the exact meaning of that word alternative. So that word has been actually introduced in the English language in the 16th century and it is coming from from Latin originally. And when coming to the description of that word I found really two core ideas.

The first one is when somebody is going to an alternative it means that there is fundamentally a choice to be made between two things option A and option B. So the concept of alternative is creating a concept of choice which are mutually exclusive. So I found that interesting. The second point is usually the alternative choice is a vendor choice. not the most popular or not the most obvious.

So actually I find today that that word is probably not the right one to describe what we call alternatives asset classes and as um as we are today in Abu Dhabi is a capital of capital where um there is so much energy creativity and where the future of financial markets is being shaped. I would challenge the room maybe to come in the next 20 minutes with a new word to describe that word alternative because when we are talking about those asset classes and talking to CIOS it's not about choosing traditional asset class or alternative it is end and when we're looking about asset under management traditional asset classes are probably much larger than alternative but when we are looking at revenues made by asset managers those two asset classes are very much comparable. So I would say the word alternative is not really not really appropriate uh anymore but just to before jumping into uh the fascinating discussion we have uh I would like to hand over to to you to quickly introduce yourself. So Sher and Lucy we are lucky today to have phenomenal panelists but I will hand over to you both to introduce yourself.

Thank thank you Luke. So, Sher Mali, I am the group CFO for Phoenix. We are a publicly listed Abu Dhabi grown uh Bitcoin miner.

Hi everybody, Lucy Gasmarian here. I'm the founder and managing partner of a crypto VC fund based here in ADGM regulated by the FSR. Uh we invest in definitely the cutting edge of assets and that includes tokens. uh and I would say that the defining uh feature of token bay capital is that we have a license to operate as a venture fund manager and we can now uh invest in token investments and that's new under the framework here. So really handinhand with how forwardinking the UAE is with these new types of assets.

So happy to talk about that later and very happy to be based here in ADGM. So maybe uh so so obviously alternative asset classes is very wide topic. Giving our two uh panelists today we are going to deep dive into one area of this maybe starting with a question with to you chair. Uh so how is digital infrastructure and and tokenization in general? How is it like sort of influencing what I would call traditional uh alternative investment?

Yeah, I think it's important to understand. And I think tokenization is often seen as this some sort of a you know a a vague mechanism or a concept which is purely just linked to crypto. Um really what it is is fractional ownership. If it's it's just making accessibility and settlement and auditability of those assets a lot more uh efficient and available on a blockchain uh for for the public to see. So it really isn't about um you know steering away from one asset class.

It's essentially facilitating your alternate investments in a shape where you can actually create ownership and put them on a forum where it's easily tradable uh for investors and making it more um democratic of sorts,

right? Maybe Lucy can elaborate on this because in VCs I mean uh few years ago it was about investing equity in uh even like blockchain type of uh of startup. So what about having another type of instrument maybe and and and token maybe to invest into those those v those uh startups?

Yeah. So actually thinking about it, you can sort of come at token investments three ways today actually. So you can go via the sort of native token route and invest in token projects. You can now have an asset that's either a fund or real estate that's then tokenized. And you can actually access tokens on national stock exchanges now because increasingly publicly listed companies are holding crypto.

So tokens are becoming more and more accessible uh through through different mechanism investment vehicles and uh I think the broad direction of travel is that essentially we're moving to complete tokenization of absolutely everything but today we're we're seeing the interesting landscape of certain parts uh that are tokenized and certain parts not. So from my perspective as a VC, I'm very interested in the token projects and investing in protocols that I can access value of that protocol by investing in the token. And that's obviously distinct from an equity investment and a traditional subscription agreement or safe. And that's where we're moving into sort of decentralized economies and and this idea of investing or participating in a network. And actually it's expanding what the role of a VC is because you can hold the token, you can buy the token, but you can also start working and contributing within that network as well.

You can stake your tokens and enhance the security of the network. You can have voting rights attached. So increasingly the role of a VC when you invest via a token is actually far more multifaceted I would say than just as an equity investor. It actually makes you more of an active investor when it's via a token.

Yeah. And the US legislation is changing relatively fast on on those topics. But I mean many of those concept and and the framework has been created here uh in in Abu Abu Dhabi. So what can you say about that like global trend uh in that in that space? I think it's been you know we've seen a complete about turn from the US and I think markets investors pretty much the whole landscape is underestimating how important the fact that US is now defining itself as a crypto country with crypto capital markets and you know using blockchain for not just for financial markets but actually for aggregating data for tracking data for tracking everything and Trump is very serious ious when he says this is the infrastructure of a new internet and that's where we are today and now that the US is no longer making crypto effectively illegal which is what they did up until this point so crypto's history is about 17 years now we're seeing the ripple effects in other jurisdictions that are saying the US has now legitimized tokens token investments network economies and what is our policy how are we going to approach this new vehicle vehicle and that's what's interesting now I would say that crypto is a top-down uh issue it's no longer bottom up it's actually the regulators the governments who are they going to issue licenses to so actually for the first time in crypto's history it's being driven by authorities and regulators rather than from from grassroots hopefully we'll find a nice combination and both will continue to flourish with the innovation but I would say that's the broad changing landscape that we're seeing as a result of uh Trump coming into power.

So back to you Sheremy on on a one specific point we have seen flows from VCs actually into crypto venture

to sort of slow down a little bit but on the flip side uh we have also observed like uh digital asset treasuries getting a lot of traction what what can you tell us more about that

so I think yeah no it's it's a fair question look I don't think that the the VCs are leaving crypto. It's just uh the capital is taking a different shape in form of how it's being invested, right? Um and I think it's back to the point Lucy is making. I think with a change in the US administration with a new government with a lot more clarity on digital assets and digital asset frameworks, um what you see is a lot of institutional flows going into holding the actual asset which is you know for example, Bitcoin, right? um what a lot of um uh funds want to do is they want to take it um essentially as an investment on their balance sheet and basically get the yields from it right so it isn't that the money is outside or it's flowing outside of the crypto space it's just finding its way into a new structure um and I think ultimately it's going to um with with a lot of traction on the digital asset treasuries now that's also cooling down a little bit what we're going to see is you will have we we see funding always comes back.

It's back to which projects it's going to be what kind of value what kind of um uh uh you know incremental value they bring to the shareholders or the investors. So you will see that money coming back into various different projects but at the moment this whole momentum into digital asset treasury is at the back of a lot more clear regulation coming out of the US.

Okay. Lucid, any any reaction to to to this specifically?

Not not specifically that. Um, but I think it's interesting that you're a publicly listed. You know, this idea of crypto companies now taking over national stock exchanges. You know, your company is one example and I'm I'm fascinated about the fact that you're listed in Abu Dhabi and that's pretty landmark and forward thinking as sort of I would say a 100%

example company.

No, no, you're absolutely right, Lucy. I think we're incredibly proud of the fact that we are an Abu Dhabi homegrown company. We're the only publicly listed Bitcoin miner. But to have that space and to be so proactive, you know, uh the sort of support we've gotten from the Abu Dhabi exchange and from Abu Dhabi global markets um to sort of, you know, carve out that space for ourselves and offer an opportunity for investors to come in and be exposed to Bitcoin through an equity which essentially is um funding raised to mine bitcoins, right? So, you're able to mine bitcoin at a much cheaper price than you would be able to buy it from the market.

So, you're right. I mean that's another way of uh a lot of um investments flowing into the space.

Yeah. So I mean on I mean on companies like Finenix um how those companies are sort of managing regulatory and also sort of operational challenges uh in crypto mining and and and blockchain in infrastructure to to deliver really sustainable yeah

long-term value. Look, uh I I think we were very fortunate to be here in Abu Dhabi because I think um again back to the point we were making earlier, the regulators were extremely supportive here. Um unlike some of our peers uh in the US who've had to really struggle before the Trump administration uh to to really establish their credibility. I think with us the the fortunate part was we chose Abu Dhabi as our home ground and the regulators ADGM uh you know even escar they were all willing to work with us and to understand how we're going to adopt regulation now we obviously it meant a lot more disclosures as a public company it meant a lot more governance but we embrace it you know we we don't think regulation is is anything that we have to oppose we embrace it we feel it brings a lot more transparency to what we do and it adds to a lot of comfort uh for the investors to know what exactly is is a company like Phoenix or any Bitcoin miner for that matter is doing.

What was the journey like to IPO? Was that straightforward or

I think an IPO journey is always a pretty uh intense one but again I think with the right stakeholders with the right partners with the support from Abu Dhabi um we've been very very fortunate and we wouldn't have chosen a different location. If we were to do it all over again, we'd probably do it here without um you know any second thoughts.

Yeah.

Um maybe a maybe a more generic question. Um I mean maybe to advise this uh this room um navigating between more I would say traditional uh uh investment into the alternative space and more I mean creative uh investment. what would be your your advice you see to ne navigate those two uh those two asset classes. So my observation with this crypto cycle uh with the last one, so I would uh categorize the last one as the euphoria phase was in 2021 when everything was skyhigh. And what really characterized the last cycle was people actually rolling their sleeves up and getting involved with, you know, hardware wallets, downloading wallets, trying to access yields in DeFi protocols, and really trying to understand the pretty gruesome world of crypto in terms of an operational uh journey that you have to go through uh to actually get exposure to some of these um protocols and some of these yields and to actually make your money work harder for you.

Nowadays, crypto is handed to us on the silver platter. You just sign onto your brokerage account. You can access ETFs. You can access Bitcoin miners. You can access, you know, effectively crypto stocks on national stock exchanges.

You've got the micro strategies or the strategy I should say. So you've got these digital asset companies that are increasingly bringing altcoins to mainstream investors again via a publicly listed equity on a stock market and you've got index funds. So actually you can be pretty lazy as a crypto investor now because your brokerage account is doing all the hard work for you and has expanded their product platform. But I do think that's a shame because the tradeoff for the ease of accessibility is that people are not actually understanding how to interact directly with blockchains, directly with networks to be a good citizen on a blockchain network because it's really about taking an active role and contributing self-custodying your tokens having a vote on how a a protocol works. And so I think that's a missing piece and why perhaps this cycle has really differed uh from last cycle in terms of the retail participation is not there.

So while it's been made easy for us, it's I think the jury's out as to whether that's ultimately a good thing in the long term for the health of these chains.

Good.

I I think um I of course respect Lucy's view on this and I think it's a very fair point. Uh but I would also argue that the fact that you can actually access the crypto universe through all these other mediums in fact actually makes it more accessible. Um and I think it actually opens up avenues for better understanding of what crypto is because otherwise it's been this really fearful journey for a lot of investors sitting on the sidelines looking at whether they should go in or not. Now if you have and I mean Lucy and I we were just discussing backstage you know mining as a service literally on your phone um offered by one of the providers in in in Dubai. I mean it just makes investors a lot more comfortable if they know that they have multiple avenues and accessibility to those investments.

Um you know my dad who's who's who's an avid investor you know not that he's he's particularly keen on crypto but you know is a lot more comfortable still using an app than operating a digital wallet. And so that is the case for a lot of traditional investors. And this is by the way one of the reasons why we've also seen a lot more momentum with digital asset treasuries because for institutions to be able to use traditional methods to access crypto is a lot more comforting than be able to hold that asset and be the custodian for it themselves.

Yeah. Okay. So I'm I'm being told that we are already uh lacking time. So I think we we should give a close to this. Thank you very much to both of you and I hope that we'll find a new word for these asset classes which is not anymore like a secondary choice but very much core and probably the main the main choice.

Thank you very much.

Thank you everyone.

Thank you.