Ben Strack

<div id="highlights-block_6215454be0bb6" class="highlights">
 <ul>
 <li>The index comprises 13 cryptoassets, with bitcoin and ether making up a combined 53%</li>
 <li>Separately managed accounts are the best way to get diversified crypto exposure in the US, WisdomTree CIO says</li>
 </ul>
 
</div>



A crypto index devised by WidsomTree Investments and Ritholtz Wealth Management is set to become more widely available next week as more financial professionals have indicated interest in the space.



The RWM WisdomTree Crypto Index (RTREE) — available via a separately managed account (SMA) — was made available<a href="https://cms.blockworks.co/wisdomtree-and-ritholtz-wealth-management-launch-crypto-index/" target="_blank" rel="noreferrer noopener"> to Ritholtz clients in December</a>.



In the time since, Ritholtz has opened, funded and invested client cash as it fine-tunes operations, according to Michael Batnick, the wealth management firm&#8217;s managing partner.



“There’s a lot that needs to go into making sure that advisers can get comfortable here, because a lot of people are wary of crypto in general,” Batnick told Blockworks. “So, any sort of funkiness or glitch in the matrix and people will get very nervous.”



Roughly 200 advisers have expressed interest in the index, Batnick added. And Ritholtz is in talks with several multibillion-dollar registered investment advisers (RIAs) about the offering.



The index will become available to all advisers on March 1 through Onramp Invest, which supplies the SMA architecture, rebalancing technology and adviser support. Crypto platform Gemini is its custodian.



Ritholtz and WisdomTree will split a fee of 50 basis points from new investors, while Gemini and Onramp will split a one-time transaction fee of 70bps.



WisdomTree Chief Investment Officer Jeremy Schwartz said during a virtual event Tuesday that the index aims to offer exposure to bitcoin and ether, while capturing potential upside in altcoins.



Bitcoin and ether currently account for 36% and 17% of the index, respectively. Allocations to 11 other coins — Terra (LUNA), Uniswap (UNI), Chainlink (LINK), Polygon (MATIC), Decentraland (MANA), Fantom (FTM), The Graph (GRT), Aave (AAVE), Enjin Coin (ENJ), Yearn.finance (YFI) and SushiSwap (SUSHI) — range from 3% to 7%.



<div class="wp-block-image"><figure class="alignleft size-large"><img loading="lazy" decoding="async" width="1024" height="550" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/02/RWM-WisdomTree-Crypto-Index-Exposures-1024x550.jpg" alt="" class="wp-image-17731" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/02/RWM-WisdomTree-Crypto-Index-Exposures-1024x550.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/RWM-WisdomTree-Crypto-Index-Exposures-1024x550.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/RWM-WisdomTree-Crypto-Index-Exposures-1024x550.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/RWM-WisdomTree-Crypto-Index-Exposures-1024x550.jpg?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/RWM-WisdomTree-Crypto-Index-Exposures-1024x550.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/RWM-WisdomTree-Crypto-Index-Exposures-1024x550.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/RWM-WisdomTree-Crypto-Index-Exposures-1024x550.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/RWM-WisdomTree-Crypto-Index-Exposures-1024x550.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/RWM-WisdomTree-Crypto-Index-Exposures-1024x550.jpg?w=50 50w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/RWM-WisdomTree-Crypto-Index-Exposures-1024x550.jpg?w=1862 1862w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /><figcaption>Source: WisdomTree</figcaption></figure></div>



The plan is to review exposures monthly. Avalanche (AVAX), which Gemini doesn’t support, is an asset WisdomTree could add in the future, Schwartz said.



<h3 class="wp-block-heading">Looking to fill a void</h3>



The launch comes on the heels of financial advisers increasingly looking to invest client funds in crypto. <a href="https://cms.blockworks.co/financial-advisors-bullish-on-crypto/" target="_blank" rel="noreferrer noopener">A survey</a> by Bitwise Asset Management and ETF Trends last month found the percentage of financial professionals investing client funds in crypto rose from 9% to 15% over the past year.



An additional 14% said they will “probably” or “definitely” buy crypto this year, according to <a href="https://static.bitwiseinvestments.com/Research/Bitwise-ETF-Trends-2022-Benchmark-Survey.pdf" target="_blank" rel="noreferrer noopener">the research</a>.



“I believe in holding the underlying but in a package that is very similar to what advisers are used to,” Onramp Invest CEO Tyrone Ross Jr. said during the virtual event. “You shouldn’t be scared or worried about custody or cold wallets or hot wallets or anything like that. Let’s take that away.”



Though WisdomTree <a href="https://cms.blockworks.co/wisdomtree-launches-spot-etps-in-europe/" target="_blank" rel="noreferrer noopener">has launched</a> exchange-traded products (ETPs) that offer diversified crypto exposure in Europe, the SEC <a href="https://cms.blockworks.co/when-will-the-sec-approve-a-spot-bitcoin-etf/" target="_blank" rel="noreferrer noopener">has not yet allowed</a> spot crypto ETFs in the US. Schwartz called bitcoin futures ETFs, which the SEC approved in October, “suboptimal” products.



“We saw…from our experience that the SMA is probably going to be the best structure for a long period of time — for sure if you want this diversified exposure,” Schwartz said.



The index is set to launch as crypto markets have dipped recently. Bitcoin is down about 25% since Ritholtz began testing the index, and some altcoins are down even more.&nbsp;



“Obviously it’s not ideal,” he said. “I wish that it had gone the other way, but by no means does this change how we feel about allocating money here.”



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Crypto Index Primed for Launch as Financial Adviser Interest Grows

<div id="highlights-block_61aa518a8cdd9" class="highlights">
 <ul>
 <li>The RWM WisdomTree Crypto Index will allow financial advisors to execute this strategy through a packaged direct indexing solution</li>
 <li>Direct ownership of crypto assets through the index is a superior way to get exposure compared to yet-to-be-approved spot bitcoin ETFs, Onramp Invest founder says</li>
 </ul>
 
</div>



WisdomTree and Ritholtz Wealth Management have created an index designed to offer retail investors exposure to the crypto market through a financial advisor.



WisdomTree is an ETF issuer and asset manager managing roughly $76 billion assets globally, and Ritholtz Wealth Management is a New York City-based RIA that offers financial planning and asset management services to high-net-worth households, corporate retirement plans, endowments and charitable foundations.



The RWM WisdomTree Crypto Index is currently made up of 36% bitcoin (BTC), 20% Ethereum (ETH) and 4% each of 11 other crypto assets, which include payment systems, smart contract platforms, layer-2 protocols, oracle networks, crypto indexing services, decentralized finance and the metaverse.&nbsp;



Aside from BTC and ETH, the other coins <a href="https://www.wisdomtree.com/-/media/us-media-files/documents/resource-library/crypto-assets/rwm-wisdomtree-crypto-index-factsheet.pdf" target="_blank" rel="noreferrer noopener">within the index</a> are Fantom, Terra, Polygon, Uniswap, Aave, Sushi Swap, Yearn.finance, Decentraland, Enjin, Chainlink and The Graph.



“As wealth managers, we have a responsibility to adapt our portfolios to this burgeoning opportunity,” Michael Batnick, Ritholtz’s director of research, said in a statement. “As fiduciaries, we have an obligation to do so in a sensible way while harnessing the benefits of increased diversification.”



<h3 class="wp-block-heading">Offering advisors access to crypto</h3>



The index has been licensed to <a href="https://onrampinvest.com" target="_blank" rel="noreferrer noopener">Onramp Invest</a>, an integration platform that provides access to crypto assets for registered investment advisors (RIAs). It is available to financial advisors using its technology platform to manage separate accounts of clients.



Onramp Invest will supply the SMA architecture, rebalancing technology and customer support for financial advisors. <a href="https://www.gemini.com" target="_blank" rel="noreferrer noopener">Gemini</a>’s custody infrastructure and crypto-native exchange will drive the index’s creation, according to the firms.



The RWM WisdomTree Crypto Index is the best assembled structure and diversified crypto asset exposure currently available to US investors, and particularly the RIA community, argued WisdomTree Chief Investment Officer Jeremy Schwartz.



“Advisors have had a tough time getting access to crypto,” he told Blockworks, noting that there are not yet spot crypto ETFs in the US that they can buy through their brokerage accounts. “Retail is very much to direct, but it’s hard for advisors to manage that the way they manage their practice.”



The lack of crypto access for advisors was a key reason WisdomTree invested in Onramp Invest, Schwartz added. WisdomTree <a href="https://www.globenewswire.com/news-release/2021/05/25/2235508/18051/en/WisdomTree-Announces-Crypto-Model-Portfolios-for-Advisors-in-Collaboration-with-Onramp-Invest-which-features-Gemini-Integration.html" target="_blank" rel="noreferrer noopener">introduced crypto model portfolios</a> for advisors in May, which it noted at the time were available through Onramp Invest and with integration into Gemini.



Eric Ervin, co-founder and CIO at Onramp Invest, said there is $90 trillion of assets in the hands of RIAs and only a small percentage of them have gotten involved in crypto.&nbsp;



“Now we’re kind of opening that door so financial advisors can actually say yes when the client says, ‘Do you offer crypto asset exposure?’” he told Blockworks.



Ervin founded Reality Shares, an asset management firm, ETF issuer and index provider. The company <a href="https://medium.com/blockforce-capital/an-introduction-to-blockforce-capital-2062118c5821" target="_blank" rel="noreferrer noopener">became Blockforce Capital</a> in 2018.



“I literally sold my ETF company because the thought of creating another ETF that owned bitcoin was silly to me,” he explained. “It was like putting training wheels on a Ferrari when really what people need is the exposure in direct form and taking self-custody.”



Gemini allows that direct ownership of crypto assets, Ervin explained. The company became a qualified custodian chartered by the New York State Department of Financial Services (NYDFS) under Section 100 of the New York Banking Law. Gemini <a href="https://www.gemini.com/blog/gemini-crypto-under-custody" target="_blank" rel="noreferrer noopener">hit $30 billion in crypto under custody</a> in May.



“It’s not wrapping everything up in an ETF and hoping that it will get approved, but actually buying assets directly with a qualified custodian,” Ervin said. “We want to give [advisors] the education that [they] need because there’s still a lot of confusion about what is a qualified custodian.”



<h3 class="wp-block-heading">WisdomTree’s crypto-focused approach</h3>



WisdomTree has been focused on how blockchain can change the financial world, Will Peck, the firm’s head of digital assets, <a href="https://cms.blockworks.co/wisdomtree-plans-to-launch-more-crypto-offerings-in-2022/">told Blockworks last month</a>, noting that the firm is looking to bring more crypto products to investors in 2022.



WisdomTree CEO Jonathan Steinberg said during the company’s third quarter earnings call in October that he sees a big opportunity for advisors to give their clients crypto exposure through models and separately managed accounts in the US. He noted that the latter vehicle may be financial intermediaries’ preference amid regulatory uncertainty around crypto ETFs.



Though WisdomTree has filed to launch a spot bitcoin ETF in the US, the Securities and Exchange Commission (SEC) has not yet approved ETFs that would invest in crypto assets directly. <a href="https://cms.blockworks.co/sec-rejects-vanecks-proposed-spot-bitcoin-etf/" target="_blank" rel="noreferrer noopener">The agency last month rejected</a> fund manager VanEck’s proposed bitcoin ETF as its 240-day review period of the planned offering was set to expire.



WisdomTree has physically backed bitcoin and ether exchange-traded products (ETPs) available in Europe and <a href="https://cms.blockworks.co/wisdomtree-plans-to-launch-more-crypto-offerings-in-2022/" target="_blank" rel="noreferrer noopener">added</a> three spot crypto ETPs to its lineup of offerings in the region last week.



The trio of new ETPs track three different indexes. The Crypto Mega Cap Equal Weight index invests exclusively in bitcoin and ether while WisdomTree’s Crypto Market index exposes investors to a diversified basket of crypto assets representing about 70% of the cryptocurrency market capitalization, including BTC and ETH. The firm’s Crypto Altcoins offering excludes bitcoin and ether, as its index comprises assets such as cardano, bitcoin cash, litecoin, polkadot and solana.



The firm could look to expand its index offerings in the US beyond the RWM WisdomTree Crypto Index as the space continues to mature.



“There are all sorts of strategies you can do, but partly you don’t want to confuse the market and have too many choices,” Schwartz said. “As sectors evolve within crypto … those are all candidates of themes.”



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