The last time The Motley Fool spoke to Balmoral Asset Management director Angus Crennan, he was busy looking for underappreciated shares all around the world.
But what a difference just one year makes.
He shut down that fund in October. And now he's started a digital assets fund, which will provide clients exposure to investments like cryptocurrency, blockchain, tokens, and decentralised finance.
Crennan told The Motley Fool that there was client demand for digital investments.
"There was a lot of conversation… could we put crypto into the traditional fund?" he said.
"[But] the version 1 fund… was designed in 2016 for friends and family's capital."
Why he closed the shares fund
In the second half of last year, Crennan felt like the old fund had achieved all it could.
"In traditional asset classes, the financial repression of the major central banks resulted in really low expected returns," he said.
"And then the other side of that is that the valuations were so high, that the risks were really elevated."
As it happens, he timed the exit almost perfectly. The S&P/ASX 200 Index (ASX: XJO) is down about 4.5% since late October.
His clients dodged January's interest rate anxiety and now the war in Ukraine.
"We got the best of the old market conditions. And we saved our investors a lot of volatility," said Crennan.
"It was only a matter of time for when a bull market like that hits a hiccup and there's no room for any sort of disappointment or risk."
He admitted some clients were upset that he wound up the old fund.
"We got to the point where we doubted whether we could continue to achieve the investor objectives. So it made sense to give everyone back their capital and say, 'Look, this structure is not right for the times.'"
We're 'all-in' on crypto and digital assets
Crennan told The Motley Fool his team is now "all in on digital assets".
"There's 300 million digital assets users now. We fully expect that to be a billion by 2026," he said.
"This is like double the speed of the uptake of the internet."
To smooth out the ride for his clients and save them some of the volatility seen in cryptocurrencies, Crennan employs what he called a "delta neutral" approach.
"That means we're not just buying cryptocurrencies with the expectation or the outlook that they are going to increase in value," he said.
"We use the term digital to respect that holistic view of the entire space… The digital ecosystem, particularly decentralised finance [DeFi], now, is a huge part of digital assets."
So with an asset base diversified from just crypto, Balmoral is aiming to "generate really strong returns without any market risk".
"For us, that's like the real secret source… Here we're able to completely divest all market and currency risk, and yet still generate double-digit returns," said Crennan.
"It really is an incredible opportunity. And so we are really excited about it."
His old clients shared Crennan's enthusiasm and some have jumped right in.
"Many of them are excited by the proposition. Many of them are witnessing the growth, but they don't really understand how big the growth has been."
