Chief Investment Officer
Creed & Bear
The Finance Hive
The birth of the Finance Hive’s Institutional Digital Assets network brought together key industry leaders across top buy side firms to discuss what the future of this nascent asset class will look like, to assess the infrastructure needed to set up a Digital Assets desk and the challenges this integration poses for non-native firms. The Steering Committee identified critical topics for discussion, including Blockchain and DLT, Custody & Storage, Liquidity & Execution, the Digital Assets Regulatory landscape, Risk Management, Technology Infrastructure, Prime Brokerage, and Credit, among others.
During these discussions, the differences and distinct challenges faced by native and non-native firms emerged as an interesting talking point. To help shed light on what firms should be aware of when looking to integrate digital assets into their workflow, our Editorial Director, Despoina Koutentaki, sat down with Andrea Nardon, a former buy side quant who has now transitioned to a digital assets native firm, taking up the role of CIO at Creed & Bear to discuss the institutionalisation of Digital Assets and how the challenges faced by native and non-native firms are being managed.
Digital assets are here to stay, and despite the lack of regulation which is keeping many buy side firms on the fence when it comes to integration, the characteristics of the asset class make it very appealing to investors.”
I think the distinction between native vs non-native will vanish soon and I, personally, don’t find it a particularly useful distinction anyway.”
“Technology! This is the main reason that made me jump to the other side. Traditional buy side desks put people at the centre of their activity, while FinTech focuses on technology..”
“It is very difficult to form an opinion on digital assets just by reading the news – especially the crypto news – as it is challenging to filter what’s real from simple hype.”
“I think you need to build a diversified team with computer science, data science and trading experience to fully realise the benefits.”
Digital assets have all the requisites for being considered an alternative asset class.”
Despoina: What’s your experience on the buy-side, and what prompted your recent move to a ‘native’ FinTech?
Andrea Nardon: I have spent my career on the buy-side as a quant, mainly as a fund manager developing and trading investment strategies deployed into various sorts of funds, active, index as well as long/short. Last year, I decided to jump to the other side and join the growing digital assets community. It is certainly a very different world, with different skill sets needed and different – and at times, far more constructive and positive–attitudes from those in industry.
DK: What is the most interesting thing you’ve identified as a buy-side moving to a native firm?
AN: I can’t point my finger at just one thing. It is a very different environment. The passion for tech and the strong conviction that fintech will be very disruptive are certainly top of the list. I think the distinction between native vs non-native will vanish soon and I, personally, don’t find it a particularly useful distinction anyway. But certainly, it will be interesting to see how the traditional buy-side will start exposing itself towards digital assets. I don’t think it will be an easy move as the risks are quite different, and traditional desks are far slower movers than a dedicated native firm.
DK: What are the most important areas to pay attention to when setting up a digital assets desk?
AN: Technology! This is the main reason that made me jump to the other side. Traditional buy side desks put people at the centre of their activity, while FinTech focuses on technology. The buy side is one of the sectors where distributed ledger and blockchain technology has not fully been utilised yet, and nor are many desks set up to trade crypto or tokenised assets. I think we are going to witness a big change in the near future, and there are already some early movers who will be a step ahead of the rest.
So for me, the main thing to pay attention to when you’re building a digital asset desk is the technology. The single most important thing is to surround yourself with the talent capable of building the necessary systems and infrastructure, and then make the best use of it.
This is a challenge for a lot of traditional buy side as this specialised knowledge does not necessarily come with trading/portfolio management experience and know-how. Additionally, there is a tendency to believe that all answers are to be found in current datasets. That’s a risk, and I think you need to build a diversified team with computer science, data science and trading experience to fully realise the benefits.
DK: Where does the industry seem to be headed?
AN: It is very difficult to form an opinion on digital assets just by reading the news – especially the crypto news – as it is challenging to filter what’s real from simple hype.
I believe one should form their opinion based on judgement and experience, and my view is that digital assets – particularly Cryptocurrencies – may not find an immediate application as a means of payment as they are simply not mature enough yet, but trading the assets themselves, and applications of the underlying technology such as the tokenisation of traditionally illiquid securities and utilising blockchain technology will have an immediate place and impact.
DK: How can the buy side come together to form a collective voice to drive adoption and development of digital assets?
AN: Digital assets are here to stay, and despite the lack of regulation which is keeping many buy side firms on the fence when it comes to integration, the characteristics of the asset class make it very appealing to investors. There is a rising demand for firms to know about the space from investors and clients, so traditional buy side desks can ill-afford to miss out, or at the very least have an eye on the movement of the market and where it’s set to lead in the near future.
A key part of ensuring the longevity and success of the sector will be sharing successes, lessons learned and mistakes made along the way for those buy side firms looking to make the leap. Building a collective buy side voice through open and frank discussion – and connecting native and non-native firms to bring everyone along for the ride is so important, and forums and communities such as The Finance Hive have a real role to play here, especially with the quality of the topics that the Hive selected and the format adopted.
Andrea has played a key role in the creation and subsequent focus of The Finance Hive’s Institutional Digital Assets network, providing us with invaluable insights, and we are most grateful to have him as a founding member and part of our Steering Committee.
Want to hear more conversations like this from the FCA, FMSB, industry storytellers and our Steering Committee? We’re hosting our first in-person meeting for the community in March so click the link below to register your interest!