Starting Jacobi Asset Management
Why our founder left capital markets to pursue a career in Bitcoin
From the trading floor to the world of cryptocurrency
I started my career in the late 1990s in New York, where I worked on the equities trading floor of Credit Suisse, a firm I spent a decade with in equities and private wealth. Flash forward to 2006, I managed the MIFID programme for the entire investment banking technology division before helping to lead two market-changing projects. The initial project set up the first regulatory vehicle in Europe, called BOAT, later acquired by IHS Markit. The second was setting up the first multilateral trading facility, Turquoise MTF, now part of the London Stock Exchange Group. Over the following five years, I spent time as an executive director of Goldman Sachs and the Royal Bank of Scotland. My team was responsible for rebuilding the brand after the Government bail-out during the financial crisis.
Following the sale of my previous company to NASDAQ, I used the time to explore the digital asset sector. I had previously looked at starting a Bitcoin exchange in 2012, but it was not the right time with other exchanges suffering enormous losses or complete failure. I remained connected, intrigued by the whole phenomenon of Bitcoin and cryptocurrency as an option for both investment and consumer adoption.
“It was not really until my father came to me asking whether or not he should be buying Bitcoin that alarm bells began ringing.”
My father had been a petroleum reservoir engineer in the Middle East and America for 50+ years, and he had no idea about Bitcoin. Still, he was interested in buying it simply because the price was shooting up.
Something as simple as my father’s comment made me worried that people would end up risking their hard-earned life savings. I was also concerned that people might lose money based on how crypto products were structured. I realised that there must be more people like my father who have no clue about Bitcoin. I wanted to know who was going to protect them if they invested in an unregulated product. If you look at the statistics that suggest 25%* of all Bitcoin has either been hacked, lost or stolen, and when you’re talking about your father’s earnings or your client’s funds, that’s not something you ever want anyone to experience.
Risk aversion in a volatile market
Returning to my background in financial markets regulation, I led the longest-running regulatory vehicle in Europe for many years, dealing with Tier One and Tier Two investment banks and asset managers.
“ I’m personally very risk-averse, and when I looked at cryptocurrency and Bitcoin, indeed at the whole digital asset sector, it seemed to me there was a real need for regulation. There was a need to mitigate the risks – and there were risks everywhere.”
I researched the counterparties involved in cryptocurrency investing to evaluate their legitimacy. I reviewed whether they could run off with your Bitcoin, how they hold and transfer it and if they are who they say they are. How do you remember your password, recovery phrase or remember not to leave your hardware backup device in a taxi or on a train?
It just felt like that was not something that I would ever want one of my loved ones to get involved in, let alone being secure enough for institutional investors dealing with vast amounts of other people’s assets under management.
How can anything that has such enormous value be susceptible to one incorrect keystroke and then not recoverable in any circumstance? To me, it was not a viable product for most people nor regulated financial institutions. For me, it introduced risk, it was unregulated, and there was no consumer protection. That was when I decided that this would be my next venture.
“By launching Jacobi Asset Management, I wanted to remove three significant hurdles to investment: the regulatory safety net, the technology risk and the counterparty risk involved in investing in Bitcoin and other digital assets.”
Blockchain and cryptocurrency present an enormous opportunity to deliver value in new ways
I am excited about the explosion of financial technology innovation that has come about since 2008 due to Bitcoin’s creation. I think that blockchain technology is fantastic and has many other applications beyond cryptocurrency. It will be as revolutionary as the internet was in changing the way we live our lives and operate our businesses. Distributed ledger technology will be of fundamental importance in creating transparent delivery of assets, wealth and value.
In many ways, the focus on Bitcoin’s price has stolen the limelight and created so much unregulated noise, with all the early adopters and converts trying to convince others to join them. Somehow we’ve lost focus on blockchain when every bank was looking to get involved in it during 2011-2012. With Jacobi Asset Management’s vast experience in regulated markets, I want to start using our positioning in the financial world to deliver actual impact and value to support those using blockchain who can demonstrate its power and usefulness to achieve world-changing outcomes.
At Jacobi, we have given a lot of thought to the shift in investment mentality and strategy. There has been a growing movement from those who traditionally gravitated towards private wealth management being a physical interaction to the next generation of investors who prefer to invest in digital assets remotely, possibly with AI or even with a particular element of gamification to encourage use.
“We recognise that the latest ways of investing include doing everything on phones, controlling our finances and making our own investment decisions without ever attending a bank in person to meet with investment managers.”
The future of investing is digital and mobile
This new generation of investors now have access to an incredible amount of opportunity just from using their mobile devices but that also introduces the risk that they are not interacting with an advisor, not always experienced investors, or from a financial background. There’s a balance between having freedom and access to new investment opportunities but also needing the protection to ensure that the interaction is actually legitimate and secure. As an entrepreneur, I recognise that there are great prospects if the risks of investing in cryptocurrency can be reduced.
“My goal, from the beginning, has been to bring the transparency and security typically found in the world of traditional finance into the digital asset space.”
With Jacobi, we are championing a world where investors can safely and simply embrace the exciting opportunities of the digital economy. Our first move is to level the playing field so that investing in digital assets can truly be for everyone. For me, it is really a continuation of a journey that started many years ago.
Source: *Chainalysis