The Evolution Of Assets – Technology – Gibraltar – Mondaq News Alerts

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Asset classes continue to dominate the majority ofinvestment conversations but how have these changed overtime? And what will asset classes look like going forward? Partnerand investment funds specialist, Jonathan Garcia from ISOLAS LLP,explores this topic.

An asset is 'a resource of economic value that can becontrolled by a person, organisation or country'. Whilethe paper definition hasn't changed, theresource' that constitutes an asset has changedgreatly.

Today, there are countless categories of asset classes. Theancient, such as gold; the historic, such as currency; the modern,such as classic cars; and the disrupters that are currently beingrapidly adopted, such as cryptocurrencies.

As technology and tastes' change, so do the assetswith which people want to interact. The good news for asset holdersis that there are now so many respected asset classes that theirportfolios aren't just being diversified for better returns,but specifically tailored to the areas of interest of theinvestor.

No commentary on the evolution of assets would be completewithout discussing the established traditional' assetclasses. Equities, bonds, property, foreign currency, andcommodities are still, by far, the dominant players in theindustry, holding a larger store of value than other classes. Thisis because they are all highly regulated with defined processes ofexchange, ownership, and taxation. They are, for want of a betterphrase, safe as houses.

However, while they are regulated, no asset class is risk-free.They are all traded on the open market and, as with all assets, areonly worth as much as a buyer is prepared to pay. The prices ofequities, bonds, commodities and currencies fluctuate continuallyand, while the value of property does not often shift quite asquickly, it still experiences large variation in value.

These characteristics are at the root of their appeal, and thereis still the possibility for assets to appreciate. However, giventhe view that no asset class is risk-free, it is no wonder that newdisrupters continue to appeal.

While not viewed as traditional', there are severalother proven asset classes that fall into the category ofexotic' assets. These include art, fine wine andspirits, antiques, as well as rare coins and stamps. These assetscan be bought at both high price points and stored to furtheraccumulate, or bought earlier in their evolution as a riskier betas their value is anticipated to grow.

When put alongside the developing classes of assets, such asonline gaming and film development, these assets can be grouped aspassion' assets. These being places for people toinvest money into areas that interest them with the hope they get areturn so in many cases this class doubles as a store andaccumulator of assets, but also a hobby.

In recent years, the definition of an asset has evolved evenfurther. Cryptocurrencies and digital assets stored on theblockchain are growing in popularity. They are increasinglybecoming a part of established portfolios, as well as attracting anew market of retail investors into the space. While cryptocurrencywas viewed as a risky bet, increased regulatory scrutiny inestablished jurisdictions, such as Gibraltar, has enabled it tobecome more trusted, and we are continuing to see institutionalcapital moving into the sector. Just recently we have seen WallStreet titan Goldman Sachs looking to recruit a VP to grow itsdigital assets unit. Crypto is the asset of the moment, andinstitutions are looking at ways to increase their stake in it.Organisations and jurisdictions that are embracing the trend lookset to flourish in this chapter of the evolution of assets.

While it is important to understand where assets have been, andwhat the current shape of the market is, it is also important forall involved in the financial services industry to be mindful ofwhat comes next. Staying ahead of the pack is often a hugeadvantage. You only have to look at PWC's 2020 CryptocurrencyIndustry report to see that Gibraltar is small but mighty, havingthe third-largest number of crypto hedge fund managers, showcasingthat early and dynamic acceptance of new asset classes can bebeneficial.

In the decades before the advent of Cryptocurrency the idea of aline of code representing a unit of value that can be traded andexchanged for goods and fiat respectively may have soundedfanciful, but today it seems almost as natural as foreign exchange.It is always tough to predict what is on the horizon for the assetallocators of tomorrow. However, it is expected that, as in ourdaily lives, technology will play an ever-increasing role. Digitalassets will become much broader in its meaning, encompassing morethan just Cryptocurrency and a few niche tokenized assets. We willstart to see huge ranges of traditional assets, from gold (alreadyunderway) to fine art and wine, tokenised, and available totrade.

However, this change may be far from the most significant. Manymay think that the biggest evolution of assets in the future istheir form, but in fact, it could be the access to them. Technologycan democratise access to investing. Gone will be the days ofneeding to allocate large sums to get the best deals, we will seemore people choosing to put away a slice of their earnings.This democratisation could be the biggest evolution in the historyof assets, and frankly, with a bigger pool of investors, traders,and innovators, we will all be better for it.

Staying ahead in the ever-evolving landscape of assetschallenges can be tricky, but managing your funds from establishedand respected jurisdictions with a reputation for quickly adaptingto changes, such as Gibraltar can provide a head start. Withtrusted advisors such as the team at ISOLAS LLP on hand, we makethe move as simple as possible, while also staying one step aheadof the pack. Making the move to Gibraltar ahead of the next greatasset evolution has never seemed so appealing.

As featured in Global Banking and FinanceReview'

The evolution of assets

The content of this article is intended to provide a generalguide to the subject matter. Specialist advice should be soughtabout your specific circumstances.

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The Evolution Of Assets - Technology - Gibraltar - Mondaq News Alerts