Banking Capital markets News

Societe Generale’s Kleinwort Hambros launches enterprise blockchain investment note


Today UK private bank Kleinwort Hambros announced an actively managed blockchain note. The Luxembourg exchange-traded note (ETN) will invest in a basket of blockchain-related stocks. Companies are selected because of the potential impact of blockchain. That includes through the “sale of software services, or through the improvement in margins that the installation of blockchain technology may produce”.

This sort of investment could appeal to more conservative investors who are interested in exposure to the blockchain sector but are wary of exposure to cryptocurrencies.

The announcement mentions that shipping and bulk commodities are two areas of interest because of the potential for margin improvements. “We like companies with complex supply chains, and those with strong market positions that are difficult to disrupt,” said John Birdwood, Portfolio Manager at Kleinwort Hambros.

Others sectors include where blockchain can help with data management issues or can enhance slim margins. Software is another relevant industry, and unsurprisingly Birdwood explicitly mentioned IBM. He also highlighted Adobe.

“We have included a couple of custody banks, because that business is labour intensive but with a fairly secure moat,” said Birdwood. “If you are a large US pension fund with multiple managers and one master custodian for all your assets, you are not going to give your custody business to a start-up. You want somebody with the reputation, the network as well as the appropriate licences.”

“We have built an innovative product which will provide our clients with the diversified exposure to the promising growth prospects blockchain technology offers,” continued Birdwood.

“ETNs are transparent investments that immediately track changes in the prices of the underlying shares and reflect that in the price of the note. The structure also gives us the opportunity to manage the underlying shares actively, because there are bound to be missed opportunities that suddenly become apparent, in which case we need to be able to make changes,” said Birdwood.

Mr Birdwood was previously Head of Investments at Baring Asset Management Limited which he joined in 1976. In 2011 Mr Birdwood joined Kleinwort Hambros when it acquired the Barings private client business.

Below are examples of some of the commodity sectors exploring blockchain.

Commodity Consortium/ Company
Agribusiness ABCCD: ADM, Bunge, Cargill, COFCO, Dreyfus
Sugar Al Khaleej Sugar
Gold, Silver Tradewind
Metals Minehub
Metals LME, ING, Mercuria
Cobalt IBM, Ford +
Tantalum Circulor
Trade finance komgo