Ever wanted to start your own niche investment fund, but didn’t have the spare tens of millions of dollars lying around to do it?

To be frank, it’s not a question that troubles the vast majority of us. But the team at Singapore-based fintech startup DEXTF thinks it should. They see every single one of us as a potential asset manager. The only things that have held us back are a lack of technology that can make it happen, as well as lack of access to the requisite capital.

But the arrival of distributed ledger technologies such as blockchain means that both those hurdles can be overcome, and DEXTF is one of a few startups around the world – along with Slovenia’s Iconomi and Switzerland’s Melonport, among others – that is using the new paradigm in an attempt to revolutionise asset management.

(From left) David Toh (SGInnovate), Federico Cristina (DEXTF), Kenrick Drijkoningen (LuneX Ventures) / Photo credit: DEXTF

It has just raised US$460,000 in seed funding. The oversubscribed round was co-led by LuneX Ventures – the US$10 million blockchain-focused fund run by Singapore-based Golden Gate Ventures – and state-owned venture builder SGInnovate.

Partners at London hedge fund CDAM also participated, alongside several undisclosed investors.

DEXTF (an initialism of “decentralized traded funds”) combines blockchain technology and investment expertise to solve one of the biggest problems facing crypto-investors.

One of the reasons why blockchain-based digital assets such as cryptocurrencies remain limited in how they can be used is because of the problem of custody. Their “decentralized” nature is often highlighted as their most attractive feature as it allows the private keys to such assets to be stashed anonymously in “cold storage” in offline wallets. But it also means that for their owners, doing anything other than keeping hold of them or transferring ownership of them to someone else is a headache.

The custody problem

This difficulty becomes especially apparent when it comes to asset management and investment, where people looking to preserve and grow their wealth have traditionally relied on the expertise of third parties.

“The only type of digital asset management that can happen [currently with blockchain] is ‘do-it-yourself’ asset management,” says Mario Aquino, co-founder and president at DEXTF. “If I want to invest or buy something, there is an immediate, immutable exchange of value – I give you my private keys, I get my asset. That works very well for [straightforward] transactions [such as in] banking. But the world of asset management is different – you really need delegation.”

However, that requires trust. And in the nascent and largely unregulated world of crypto-assets, trust is in short supply.

“Today, if I want to invest [digital assets] using a third-party professional, I need to give them basically the ownership of my tokens, and trust that they’re not only going to do their job by investing, but [also that] they’re not going to leave me or lose the keys and therefore my wealth disappears immediately,” Aquino tells Tech in Asia.

“The digital asset industry is not flourishing in our view because only a very limited part of our wealth can be invested today. Either I invest directly and I don’t have the time or expertise [to maximize returns], or I use professional asset managers that I can only give 1% of my wealth to that I know I can afford to lose.”

Democratizing asset management