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  • Writer's pictureSunil K Pai, CFA

There's a BlockChain in Your Investing Future

In the hope of spurring some thoughts among us and forward thinking our way to a decentralized, more efficient world of investment management, let's start with a short list of some worn out ideas that are still largely propounded by the investment community for investing in liquid, highly developed, efficient markets (read: US Stock Market):

1) Technical analysis (aka charting); if everyone is starting at the same chart, what makes one a better decision maker than another for real alpha?

2) Fundamental analysis, what set of analysis of core balance sheet, income statement and business strategy is one analyst going to bring over another?

3) Big data, structured analysis, here is the new panacea for those who gave up on the above, except it likely leads to a similar answer (no alpha)

4) Modern [sic] Portfolio Theory, a 1950s mean variance optimization-based idea that is largely useless in an efficient market

The point to this rant against our industry...

To wit: recently, we did our first cross-border payment transaction for computer equipment using Etherium/Bitcoin to effect payment. It was stunningly simple, transparent, efficient and less costly than the old school bank wire payment process.

So, what if the great Enforcer (the "efficient market hypothesis" as it is currently known) of truth ends up resting on blockchain technology? Sounds like the makings of an evolved, highly developed marketplace for asset auction and exchange processes; which currently is served by the likes of the New York Stock Exchange, NASDAQ, et al. The implications to asset management are profound.

So, on behalf of investors getting a fairer shake of risk and return, ProForza will continue to push the envelope of how asset class returns (eg. stocks, bonds, commodities, currencies) are defined versus predicted in liquid, developed markets. Secondly, since ARBi and investAWR are already baked on math and computers, blockchain-based technology will be the next bastion for those of us willing to embrace an even higher level of market efficiency and alpha potential.

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