Morgan Creek Launches Digital Asset Index Fund

| Publish date: 08/29/2018

Backed by the institutional investment firm Morgan Creek, the Morgan Creek Digital Asset Index Fund was officially launched on Tuesday, August 28. This investment fund has been launched in partnership with Bitwise Asset Management.

Morgan Creek current already manages more than $1.5 billion in assets for its clients and now, with this new fund, it gives its clients, who range from wealthy families, pensioners, endowments and accredited investors the chance to get indirect exposure to cryptocurrencies.

Pre-Mined Cryptos Excluded

The cryptocurrencies that will be covered by this new index fund are Bitcoin, Ethereum and another 8 large-cap digital assets. The other cryptos in the list are Bitcoin Cash, EOS, Zcash, Litecoin, Dash, Monero, Ethereum Classic as well as Omisego.

However, excluded from this list are some of the biggest cryptocurrencies in the world – notably Ripple as well as Stellar. Other cryptocurrencies that have been omitted from this fund are TRON, NEM, ICON and NEO.

This is due to the fact that these assets were created through a controversial process called pre-mining. The majority of cryptos have been mined via a process that rewards the computing power used to create the Blockchain. In the pre-mining process, the cryptocurrencies are mostly or even completely created in one go when the Blockchain is established.

This means that such cryptos carry some fundamental risks to which Morgan Creek does not wish to expose its clientele. According to the firm’s partner Anthony Pompaliano, if a central party owns about 30% or more of a cryptocurrency’s supply, then that crypto would not be included in their index.

This is because the centralization of a cryptocurrency carriers with it some regulatory risks such as a possibility for market manipulation. Large percentage holders could potentially manipulate the price of the cryptocurrency if they so desired.

Another issue is that such pre-mined tokens could also be classified as securities by the regulators in the near future.

Further Minimizing Risks

While the issue of whether a token qualifies as a security or not does not bother Pompaliano, what does concern the index is the possibility of fraud, market manipulation as well as hack attacks.

So, to ensure that risks are minimized, Morgan Creek has also laid out certain other conditions that need to be met for these cryptos to be included in their index. Firstly, the crypto should qualify for custody as well as trade concentration limits. The crypto should also have the ability to be secured in cold storage.

IOTA and Cardano were also excluded from the index since they did not meet the cold storage criterion. Tezos did not meet the exchange requirements and VeChain meet the trade concentration rules.


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