Fintech on Friday: Is now the time to dive into crypto markets?

Despite cryptocurrencies having crashed 50 per cent below their market peaks, with the possibility of more downside, Azamat Sultanov, co-founder of Fortu Wealth, believes this turmoil marks the ascendancy of a new asset class, particularly suited to digital investment platforms.

“Previously, crypto had no correlation with the Nasdaq,” says Mr Sultanov, whose start-up is aimed at millennial high net worth clients looking for a digital rather than face-to-face experience in wealth management. “It operated within a separate community, driven by its own news and blogs.”

Now, with many institutional investors having entered the space, the class has gone mainstream, he says, becoming a proxy for tech holdings. Most Fortu clients have an allocation of 2 to 3 per cent, and with assets now back to pre-pandemic prices, following a “rollercoaster” ride, Mr Sultanov reckons interest in crypto will once again begin to grow. “A lot of people, who have been in the industry for long enough, understand this is a real opportunity to invest right now,” he suggests, talking about a plethora of long- and short-term themes which can drive investors’ behaviour in the market.

“Inflation as a theme has already played out, as it has been in the news for 18 months,” he reflects. “At the beginning of the war, Ukraine was on the first page of every newspaper, now it’s on the fifth or sixth, as people get tired of the same news and crave something new. The market is essentially a reflection of our life. If a newsworthy event is not good enough, people start talking about and analysing the next one.”

ESG yet to break through

One theme which has a more of a slower burn is that of environmental, social and governance (ESG) investment, which Mr Sultanov believes is still limited to a cult status, albeit one with fluctuating popularity. “ESG is not yet for the majority,” he says, explaining how Fortu targets interested clients, identified by studying their behavioural habits, with baskets of suitable stocks.

“It’s for a particular type of client, millennial individuals, with an active view of their position. For these people, it really matters where you invest. For now, it’s still a small niche rather than the mainstream, but it will become mainstream over time.”

ESG investing today, suggests Mr Sultanov, is perceived by private investors as almost a luxury, better indulged in times of greater economic stability. “During economic uncertainty, like today, this factor becomes less important for most people, as they become more concerned about financial stability, safety and have fears that are stronger than any values and beliefs.”

Digital first

The premise behind Fortu, he explains, is that the psychology and behaviour of all individuals can be classified by an algorithm – with a little help from investment professionals – into a handful of profiles or personas, reflecting their age, plans for retirement, family situation, tax status and view of the world. Of his 20 staff, only a handful are client-facing, and these only really interact with customers during the intense onboarding process, when the initial relationship is formed.

Rather than the “hybrid” service which most private banks offer in the digital space, Mr Sultanov sees his service as being “digital but with a personal element”, a world away from the “wining and dining” which he says most firms were offering their wealthiest customers before the pandemic.

This was the world in which Mr Sultanov cut his teeth working for a family office selling ultra-high net worth investors back in 2014, making use of private banking platforms at leading players including Julius Baer, Credit Suisse and UBS, before he became disillusioned. Whereas he saw some digital solutions available for public markets, he saw little technological innovation connecting clients to major deals in private equity and other alternatives.

This gave him the incentive to set up a digital service with greater transparency than the traditional model he witnessed. “Looking at the private banks, I realised the market overall was very fragmented, non- transparent and with so many inefficiencies,” he recalls. “There were a lot of people seeking very fat margins. For it all to work, you needed to know the right people with access to the right deal. It’s as if we were still in the 20^th century not the 21^st.”