The universe’s largest asset manager has a new crown.

BlackRock has surpassed Grayscale as the leading manager of on-chain capital as its lineup of exchange-traded funds — including the largest Bitcoin product on the market — continues to impress. The undisputed asset management king now has $23.3 billion on the blockchain, outpacing Grayscale’s $22.7 billion, according to data from research provider Arkham Intelligence. 

BlackRock’s dominance also highlights the growing footprint of traditional firms in the digital asset industry, and signals renewed crypto confidence from some of the world’s largest money managers. “We may be seeing the beginning of a changing of the guard,” Grace Capital Management advisor Lauren Fischer told The Daily Upside. “These firms don’t want to leave money on the table.”

Black on Top

While BlackRock might be in the pole position, the original gangster of the Bitcoin game is undisputedly Grayscale. Before crypto ETFs were given the green light by regulators in January, the Stamford, Connecticut-based firm was the leading digital assets issuer, with two of the only exchange-traded products, GBTC and ETHE, on the market. After Grayscale won a lawsuit with the Securities and Exchange Commission that helped usher in Bitcoin ETF approval, that landscape turned on its head. 

In the past year, GBTC lost its top spot to the much cheaper iShares Bitcoin Trust (IBIT), and it could soon become No. 3 behind the $10 billion Fidelity Wise Origin Bitcoin Fund (FBTC). The issue? In a tight price environment for asset management funds, GBTC’s expense ratio of 1.5% is the most expensive, and several times higher than products from BlackRock or Fidelity.

When GBTC was the only player in the game, those fees may have been warranted. With fees dropping to as little as 25 basis points, not so much.

Not So Farfetched Anymore. Remember when Cathie Wood projected the price of Bitcoin to skyrocket to $2.3 million if institutional investors allotted a little more than 5% of their portfolios to the cryptocurrency? Well, don’t look now. 

The number of institutional investors holding bitcoin ETFs rose 14% in the second quarter, according to recent data from Bitwise Asset Management. The report, compiled from 13F filings, showed institutions locked in 21% of total bitcoin ETF assets with some $11 billion now in the hands of some of the world’s largest investors. Case in point: Goldman Sachs sunk approximately $419 million into the funds in June, locking in positions in at least seven out of the 11 products, according to filings.

“It appears to us that this is being driven by lower cost offerings, especially if investors plan to buy and hold for an extended period,” Halbert Hargrove co-chief investment officer Brian Spinelli told The Daily Upside.

Boom goes the dynamite. 

A third-generation heir of Alfred Nobel — the inventor of dynamite and founder of the eponymous prize — made a cracking entrance into the US wealth management industry last week. Peter Nobel is among a group of investors partnering with executives at the wealth manager Cardea to create a rebranded firm named Fourcore Capital.

The $25 million investment into the Atlanta-based RIA will help bolster acquisitions with a decidedly ambitious and tech-heavy agenda, according to a release. The firm plans to create next-gen data analytic models, convert assets into digitized tokens, open up seamless wallets, and design AI-driven advisory systems to help shape wealth management’s future. Oh, is that all?

It’s the latest strategy by a foreign investor to snap up US wealth managers and cash in on an explosive global M&A marketplace that is projected to top $3 trillion by the end of the decade. “Investment firms are seeking higher internal rates of returns by diversifying and investing in US wealth management businesses,” industry consultant Carolyn Armitage told The Daily Upside.

Keeping It Classy

The Swedish Nobel dynasty topped the world’s richest in its heyday. According to a Bloomberg report, other notable Nobels include JPMorgan M&A banker Erik Nobel and Johan Nobel, who works with Swedish Export Credit Corp. Those descendants, along with Peter, sit on the Nobel Sustainability Trust, a Zurich-based company dedicated to advancing sustainable economic growth that’s good for the planet, according to a release. 

The funding round from Nobel’s trust may not be the last for Fourcore. ​​Last year, Cardea went public through a SPAC merger; it more recently raised $15 million in debt financing to support its growth. The company’s board received a valuation report of more than $5 billion for Fourcore, according to the release, and had $12.7 billion in assets under advisory prior to the deal, Bloomberg cited.

What A Dynamite Idea. The wealth management M&A industry has been supercharged in recent years, and a major investment opportunity for private equity firms. RIAs make prime targets because of their stable cash flows and lucrative returns on investment. By the end of 2029, the value of wealth management firms globally is projected to top $2.92 trillion, up from $1.85 trillion in 2023, according to new data:

• A “constellation of factors” is driving the industry forward, most notably the rising number of ultra-high-net-worth individuals and a growing acceptance of robo-advice for the mass-affluent.
• The rise of independent RIAs is also contributing significantly to industry expansion, adding innovation and personalization, according to the report.

“We look forward to our partnership with Fourcore and in making a greater impact in sustainable investing to further our goal of improving the planet,” Nobel said in release. The mouth-watering ROI may have also played a role.

If you can’t pay the fine, don’t (allegedly) do the crime. 

Regulators are intensifying their focus on two major financial institutions, and potential fines stretching into the billions of dollars may become some of the heftiest levied in the wealth management and banking sector this year. The Securities and Exchange Commission sent a Wells notice last week to a top executive at the $1.5 trillion Franklin Templeton network over discrepancies in trade allocations. In a separate case, the Justice Department, the Treasury, and other regulators are investigating TD Bank over alleged widespread money laundering and other infractions at several of its US branches. 

“Banks should take heed,” said Christopher Bosch, an associate at the law firm Sheppard Mullin. “These issues are squarely on regulators’ radars and in their crosshairs,” he told The Daily Upside, adding that federal regulators have been particularly aggressive in regulating banking practices, including anti-money laundering, off-channel communications, and cryptocurrency. 

Wouldn’t Notice

Ken Leech, the co-chief investment officer of Franklin’s fixed income manager Western Asset Management, was served with a Wells notice last week, which warns that the agency plans to bring enforcement. That led to a leave of absence and forced Western Asset Management to close the $2 billion macro opportunities strategy that Leech ran, according to a press release:

• The firm launched an internal investigation focusing on certain past trade allocations of treasury derivatives, according to a 10-Q.
• It’s unclear exactly how much this could cost, but Franklin’s stock fell roughly 8% last week. Its share price is down nearly 30% year-to-date.

Do the Laundry. TD Bank is facing even steeper challenges, with a possible $3 billion penalty due to compliance failures looming. Federal agencies allege that TD Bank employees at branches in New Jersey, New York, and Florida were involved in money laundering operations. In some instances, TD is accused of facilitating the laundering of money linked to Chinese crime groups involved in US fentanyl sales, The Wall Street Journal reported. 

To address these financial pressures, TD Bank sold 40.5 million shares of Charles Schwab, reducing its stake to 10.1% from 12.3%. Bosch noted that multibillion-dollar AML penalties are rare, usually not topping $1 billion, but highlighted the gravity of the situation, especially with the alleged involvement in a $653 million fentanyl conspiracy. 

“I think it’s fair to call that figure high and pretty extraordinary,” he said.