We’re teaming up with our partners to bring you more insights into the innovative indices offered in our Model Marketplace. The Beyond Bitcoin Web3 Sector Leaders Index model provides an efficient, secure, and transparent method for advisors and their clients to access truly diversified broad exposure to digital assets across key sectors, themes, and individual coins—all through a single investment.
What market conditions and investor needs drove the creation of this model?
Beyond Bitcoin, LLC was launched with the mission of bringing best practices from traditional asset management to digital asset management, starting with superior portfolio construction based on indices that are properly diversified. The indices were developed to fill a massive gap in crypto investment offerings, which is a lack of truly diversified core and thematic options for investors.
Most of the leading broad crypto index funds are market-capitalization weighted and may have over 90% of their assets in just two cryptocurrencies, Bitcoin and Ether. This is sub-optimal for two reasons: they are not diversified from a general investment standpoint, and they don’t offer exposure to many of the most exciting cryptocurrencies that may represent the future of the asset class. The indices offered by Beyond Bitcoin, LLC track the space in a more diversified and inclusive manner than many other crypto indices currently on the market. The weightings and diversification more closely reflect what investors expect from professionally managed portfolios in other asset classes.
What is the thesis or theme of the Beyond Bitcoin Web3 Sector Leaders Index, and what is its key objective?
The Beyond Bitcoin Web3 Sector Leaders Index is a Core digital asset index seeking to provide broad, diversified exposure to digital assets across key sectors, themes, and individual assets. It uses a unique, top-down thematic approach that first identifies critical themes in the space and selects dominant protocols to represent each theme. Multiple factors are considered in selecting the themes, including potential and future use cases, investor attention, and diversification. Current thematic and sector exposure includes Web3, Metaverse, smart contracts, DeFi, Ethereum challengers, Layer-1 protocols, and scaling solutions. Importantly, not only is each individual holding equally weighted, but each theme is also equally weighted, providing much broader diversification across the entire ecosystem.
“For the first time, financial advisors have a truly diversified offering that tracks the broad digital asset market across key sectors, themes, and individual assets, combined with the numerous significant benefits of the separately managed account structure. The weightings and diversification more closely reflect what investors expect from professionally managed portfolios in other asset classes.” -Paul de Leon, Founder and CEO of Beyond Bitcoin LLC.
The performance data quoted represents past performance, and past performance is not indicative of future performance. It is not possible to invest directly in an Index. Index returns shown do not represent the results of the actual trading of investable assets, cryptocurrencies, or a fund. Historical performance results for investment Indexes and/or categories generally do not reflect the deduction of transaction and/or custodial charges, the deductions of investment management and other fees, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results. Current performance may be lower or higher than the return data quoted herein. Index returns shown are unaudited and do not represent the returns of an actual account.
What currencies are included, what are the specifics of the model that really set it apart, and what strategies are utilized?
What truly sets the Beyond Bitcoin Web3 Sector Leaders Index apart is its ability to provide much broader diversified exposure across the digital asset ecosystem than typical market-cap-weighted crypto indices. This is a result of the unique top-down thematic approach, along with the weighting scheme employed. To our knowledge, it is the only SMA model portfolio to provide such broad exposure, not just across individual holdings but also across critical sectors and themes.
To see the full sector, theme, and currency weightings, log in to Onramp Academy and check out the Web3 Sector Leader Fact Card in the Model Marketplace
As previously mentioned, many market-capitalization weighted indices may often have greater than 90% of their weighting in just two coins, Bitcoin and Ether, While some may have a large number of holdings, many of the weights in alternative coins may be quite small. Even so, providers of these market-capitalization-weighted indices will often state that their index captures a large percentage of the overall digital asset space. This is because Bitcoin and Ether have a market capitalization so much larger than most other coins, so those coins represent 61% of the total market cap of the industry,* not necessarily because these indices offer great diversification beyond those two coins. While modified market-cap indices attempt to dampen this effect, they still may not provide significant sector exposure beyond currencies and smart-contract platforms.
*According to Coinmarketcap.com market cap dominance 01/31/23.
To summarize, Beyond Bitcoin utilizes a unique top-down thematic approach. First, sectors and themes considered to be key components of the emerging Web3 ecosystem are identified. Multiple factors are considered, including but not limited to current and potential use cases, investor attention, and diversification. Next, dominant protocols are selected to represent each theme, and the underlying digital asset is added to the index based on meeting certain eligibility criteria, such as appropriate trading and custody support. If there is one eligible clear dominant player within the theme, it is generally added to the index. If there is no clear single dominant protocol, then one of the top three eligible digital assets is chosen to represent that particular theme.
The index is reconstituted and rebalanced on a quarterly basis. At this time, new themes may be considered for inclusion in the index, while other themes may be considered for removal. The same factors are considered as mentioned above for initial inclusion in the index. Individual holdings are brought back to an equal weight at the quarterly rebalancing but will deviate from equal weight during the quarter as a result of market movements.
Importantly, not only is each individual holding equally weighted, but each theme is also equally weighted, providing much broader diversification across the entire ecosystem.
What do you predict for digital markets in the year ahead?
The Web3 Sector Leaders Index provides an elegant model for advisors and institutions to gain exposure and track the performance of some of the potentially most promising areas of digital assets in a truly diversified manner. The weightings and diversification more closely reflect what investors expect from professionally managed portfolios in other asset classes.
The SMA wrapper offers potentially significant advantages over competing alternatives such as trusts, including direct ownership of assets, the ability for tax-loss selling, no NAV discount, and no lock-up period. The Onramp solution brings together all the key elements for advisors to manage digital assets for their clients with an easy-to-use advisor interface. Secure institutional quality custody is provided by Gemini Trust, one of the world’s leading qualified custodians.
More about Beyond Bitcoin, LLC.
Beyond Bitcoin is a leading provider of digital asset indices and separately managed account (SMA) model portfolios. Incredible developments are occurring in areas such as Web3, smart contract platforms, Metaverse, NFTs, Layer 1 protocols, and Layer-2 scaling solutions. Beyond Bitcoin, LLC is focused on these exciting crypto themes and their native tokens with a series of indices to track the overall market as well as these sub-sectors. Current Beyond Bitcoin digital asset indices include Web3 Sector Leaders Index, Metaverse Index, Smart Contract Index, Smart Contract ex-Ethereum Index, Smart Contract 50/50 Index, Core 20 Equal Weight Index, Core 20 – 50/50 Index, and Core Crypto IRA Index.
Paul de Leon, Founder and CEO of Beyond Bitcoin, LLC., has more than 25 years of experience in the asset management industry, most recently as Institutional Portfolio Manager at Franklin Templeton. Prior to his 12-year tenure at Franklin Templeton, he held senior positions at Alliance Bernstein, Lazard Asset Management, and Loomis Sayles as well as experience launching an SEC-registered investment advisory firm. He was a pioneer in the sector indexing space, creating the Internet 100 Index and launching one of the first SEC-registered 40-Act index mutual funds focused on Internet companies in the 1990’s.
Mr. de Leon has experience with a wide variety of asset classes and strategies, including cryptocurrencies, global equities, currency, fixed income, options, and futures. He has been involved with cryptocurrencies since 2017. He has worked with a large number of RIAs, financial advisors, institutions, and their gatekeepers. He has extensive public speaking experience, presenting current insights into the markets to groups as large as 800 financial advisors.
Mr. de Leon earned an undergraduate degree from Cornell University in Engineering and an MBA in Finance from the Anderson School at UCLA. He holds the Chartered Financial Analyst designation (CFA) and was one of the first Toigo Fellows.
Disclosures: This material is intended for informational purposes only and not as financial product advice. It is not an offer or solicitation to buy or sell securities and may not be construed as investment advice and does not give investment recommendations. Nothing in this material or in the Beyond Bitcoin Indexes (Indexes) shall constitute or be construed as an offering of financial instruments or as investment advice or investment recommendations (i.e., recommendations as to whether or not to “buy,” “sell,” “hold” or enter into any other transaction involving a specific interest) by Beyond Bitcoin or its affiliates or licensors or a recommendation as to an investment or other strategy. This material should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor.
The performance data quoted represents past performance and past performance is not indicative of future performance. It is not possible to invest directly in an Index. Index returns shown do not represent the results of actual trading of investable assets, cryptocurrencies, or a fund. Historical performance results for investment Indexes and/or categories generally do not reflect the deduction of transaction and/or custodial charges, the deductions of an investment management and other fees, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results. Current performance may be lower or higher than return data quoted herein. Index returns shown are unaudited and do not represent the returns of an actual account.
Investors should consider obtaining independent advice before making any financial decisions. Beyond Bitcoin has no responsibilities, obligations or duties to investors in these Indexes. Data and other information available via this material or the Indexes should not be considered as information sufficient upon which to base an investment decision. All information provided by this material and the Indexes is impersonal and not tailored to the needs of any specific person, entity or group of persons. Investment decisions should always be made based on the investor’s specific financial needs and objectives, goals, time horizon, and risk tolerance. Beyond Bitcoin does not express any opinion on the future or expected value of any digital asset, cryptocurrency, index, security or other interest and do not explicitly or implicitly recommend or suggest an investment strategy of any kind. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client or prospective client’s investment portfolio. The investment return and principal value of an investment will fluctuate; thus an investor’s investments, when redeemed, may be worth more or less than their original cost and an investor may experience loss of principal. The asset classes, Indexes and/or investment strategies described may not be suitable for all investors, and investors should consult with an investment advisor to determine the appropriate investment strategy.
Beyond Bitcoin does not guarantee the timeliness, accuracy or completeness of any data or information relating to its Indexes or make any warranty, express or implied, as to the Indexes or any data or values relating thereto or results to be obtained therefrom, and Beyond Bitcoin expressly disclaims all warranties of merchantability and fitness for a particular purpose with respect thereto. Certain information contained in this material is derived from third-party sources that Beyond Bitcoin believes to be reliable. However, Beyond Bitcoin does not guarantee the accuracy, completeness, or timeliness of such information and assumes no liability for any resulting damages. All opinions and views constitute our judgments, and those of third-parties, as of the date of writing, and are subject to change at any time without notice. All information in this material is subject to change and update from time to time. Moreover, no investor or prospective investor should assume that any such information serves as the receipt of, or a substitute for, personalized advice from Beyond Bitcoin or from any other investment professional.
This material includes forward-looking statements that represent Beyond Bitcoin’s and third-party opinions, expectations, beliefs, intentions, estimates or strategies regarding the future, which may not be realized. Given these uncertainties, undue reliance should not be placed on the forward-looking statements, Beyond Bitcoin does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Beyond Bitcoin does not guarantee events described on this material will happen as described or that they will happen at all.
All investments involve risks, including the loss of principal. Digital assets are subject to many specialized risks and considerations, including but not limited to risks relating to: regulatory uncertainty around the rules governing digital assets, high volatility in the value/price of digital assets, immature and rapidly developing technology underlying digital assets, security vulnerabilities of this technology, credit risk of digital asset exchanges that may hold an account’s digital assets in custody, digital asset exchanges and other aspects and parties involved with digital asset transactions, unclear acceptance of some or all digital assets by users and global marketplaces, manipulation or fraud, Cybersecurity risk, liquidity risk, unlisted securities risk and market risk. The trading price of many digital assets, including the Index constituents have experienced extreme volatility in recent periods and may continue to do so. Extreme volatility in the future, including further declines in the prices of digital assets could cause investments in these assets, or investment vehicles that track them, to lose substantially or all of their value. ©2023 Beyond Bitcoin LLC. All rights reserved. Redistribution or reproduction in whole or in part is prohibited without the prior consent of Beyond Bitcoin LLC.