Citi’s Business Advisory Services, in concert with Citi Services, projects a brave new world in its new survey entitled Industry Revolution – Investment Management in 2033; a world in which blockchain technology and artificial intelligence couples with big data to manage contract terms, enforce investor rights and impose issuer rights. These new building blocks are predicted to give rise to new investment instruments, which have been dubbed “Corpits” and “Ownits.”
The Demise of Equities and Bonds
Corpits and Ownits have the potential to change the foundational concepts we hold with regard to ownership of real assets, as well as the relationship between investors and companies. The survey suggests that the demanding structural issues of today’s markets could be revolutionized by creating a registered investment token (think bitcoin) that incorporates financial, ownership and utilization rights to create novel forms of liquid ownership units or Ownits.
The Ownit is an appealing concept, offering not only transparency, but also seamless integration into primary issuance and secondary trading ecosystems. Such an investment vehicle could provide individuals with a mechanism to build a highly diversified portfolio, which comprehends equities, bonds, art, infrastructure, wine, intellectual property rights and other alternative assets.
This concept addresses the demographic challenges that arise from the needs of retiring baby boomers, millennials and a growing global middle class…something that changes the investment landscape from one in which the majority of assets are institutionally directed to one that is increasingly directed by individuals.
Consider for a moment the amount of individual wealth controlled by potential investors that have no access to hedge funds, private equity and other private investment vehicles simply because they do not fall within the definition of an accredited investor.
It does not require a great deal of imagination to see how this concept could revolutionize the way people invest. Stocks and bonds would become an anachronism.
Corpits are simply an extension of the Ownit concept to companies, only these are defined as corporate exposure units. As we know, there has been a significant decline in publicly traded companies over the years and a corresponding decline the number of IPOs. This can be traced to almost $1 trillion in private equity dry powder, which has the effect of encouraging companies to retain their private status, particularly small companies with the greatest growth potential.
The hedge fund industry is well positioned to take advantage of these innovations because they already possess the requisite skills to construct the portfolios, which must necessarily be the building blocks and foundation for Ownits.
Hedge funds would then be able to leverage this new investment vehicle in a manner which could allow non-accredited investors access to the expertise of hedge fund professionals. Moreover, the Ownit provides heretofore unheard of opportunities to capture the investment dollars of millions of non-accredited investors.
The impact on the hedge fund industry’s assets under management could be nothing short of staggering—ample motive for the hedge fund industry to take these concepts seriously and a compelling reason to pick up a copy of Industry Revolution – Investment Management in 2033.