Swissquote debuts AMC linked to basket of cryptocurrencies

Swiss online bank Swissquote has launched the Multi-Crypto Active Index, the first actively managed multi-cryptocurrency certificate aimed at retail investors seeking to get exposure to a diversified portfolio of four different cryptocurrencies through a vehicle publicly traded on the Six Swiss Exchange.

The portfolio consists of the four cryptocurrencies with the highest trading volume and highest market capitalization: Bitcoin, Bitcoin Cash, Ethereum, and Litecoin. By buying a portfolio of four different cryptocurrencies, investors are less exposed to the risks of potential losses by holding their investment in a single cryptocurrency.

The decision to use the AMC vehicle responds to the limitations around the number of exchanges that will accept cryptos as underlyings, according to Peter Rosenstreich (pictured), head of market strategy at Swissquote. "AMCs provide a very efficient, quickest to market, less expensive and transparent way to deliver this kind of less liquid strategy and make it accessible to a broad range of investors," said Rosenstreich. "It is the next evolutionary step in our strategy of opening up the cryptocurrency market to the mainstream investor by creating investment opportunities that reduce volatility while offering the transparency that comes with the listing at the Swiss Exchange."

The new portfolio is designed for investors "who recognize the potential of cryptocurrencies but rather than taking the risk of investing in a single one, look for a structured product that is easy to trade and actively managed", according to Rosenstreich.

The certificate's volatility is reduced by a quantitative algorithm developed by Swissquote's Quantitative Asset Management team. The algorithm uses historic price information to allocate investments between the four currencies. The minimum share of each of the four cryptocurrencies is 10%, so the maximum weight of a single cryptocurrency within the portfolio can go up to 70%. The objective of the algorithm is to stabilize price volatility and thereby reduce the risk of downturns.

The Swissquote Multi Crypto Active Index (ISIN CH0372704095) is denominated in US Dollars, and has a minimum investment of US$1,000, which is also in the initial price of the certificate. Management fees are 1.5% per year, and there is no minimum holding period.

Rosenstreich said that AMCs can provide access to assets at a "low entry price" and also allow to "fine tune" the products much more than other instruments, according to Rosenstreich. "We are planning to expand our range of AMCs and grow the offering in a more opportunistic way," he said. "AMCs are a very efficient way to structure products and it shows the flexibility of these products to provide access to interesting assets that are not very liquid. This is a more sophisticated way to use a certificate which deploys an algorithmic to reduce volatility, and they are a very good complement to tracker certificates which have been very successful."

In the last nine months Swissquote has expanded its cryptocurrency offer. In mid-2017 Swissquote became the first European online bank to offer Bitcoin investing on its trading platform. In November 2017 the bank launched the Swissquote Bitcoin Active Index, a Bitcoin certificate that comprises data collected from various sources to create propriety indicators, such as technical patterns, realised volatility measures, buy and sell pressure measures, and social media sentiment; and a machine learning algorithm trained to predict the short-term direction of future returns based on those indicators.

Vontobel also launched today a participation certificate tracking the Solactive Blockchain Technology Performance Index, an index comprising shares of up to 20 companies from industries with the greatest potential for value creation in the area of blockchain.

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