Sofia Paskal, influential blogger and experienced blockchain PR specialist, continues a series of interviews for Membrana Blockchain Platform with financial markets professionals to discuss fundamental prospects of blockchain technology and tectonic shifts in asset management industry. This time she was happy to catch up with Constantine Cherepanov, Head of Research with Fosun Eurasia Capital. This investment arm of Fosun International, a global giant with AUM of $85bn, is responsible for investments on emerging markets, from Russia to Indonesia and from South African Republic to Uruguay.
Sofia Paskal: Thank you for meeting. How does it feel in asset management industry these days? Fosun Eurasia Capital headquarters is located in Moscow yet the firm operates globally. And Russia doesn’t seem to be favoured by investment banks any more…
Constantine Cherepanov: Well, the country has definitely seen better days. I’ve been with investment banking for nearly 15 years already and we all remember Russian market in its prime. Names like UBS (my former employer), Goldman Sachs, Deutsche Bank and Morgan Stanley moving their CEE and even CEMEA operations to be governed from their Moscow offices; long line of IPOs and corporate bond placements. Most of it is forgotten.Yet, there is still life out there. BRICS acronym has lost some of its magic tune but the group is still driving the global growth. New frontier players in East Asia, Latin America and Africa are rapidly developing; some of them show an amazing mix of demographic boom and adoption of the newest technologies. The planet never sleeps: if the sun hides somewhere, there is sunrise on the other side of the world. And this circle never ends.
Constantine Cherepanov, Head of Research Fosun Eurasia Capital
SP: You’ve been traditionally focused on basic industries, namely oil and gas, petrochemicals, utilities, fertilizers and such. How close are they to digital technologies? Are there any promising signs of adoption of things like cloud storage, big data, AI, machine learning and decentralized solutions?
CC: Let me split this in two. On one hand, some of those companies operate in aggressive and risky environments: on daily basis they face war and criminal activities, hostile government acts, changing regulations and unstable financial and currency moves. Their owners and top managers are more focused on addressing these issues rather then experimenting with technological advancements.On the other hand, ability to change and adapt to changes is in their genome. Having survived in harsh competition, these companies understand that the future brings new challenges, and I think they will be ready to response when the time comes.Our meetings with some of medium sized family owned businesses often involves communication with 60+ or even 70+ Warren Buffett style CEOs and directors. Nevertheless, there is almost always some representative of the younger generation, a thirty-something Stanford or MIT graduate who has words like “blockchain” and “augmented reality” in his vocabulary.
SP: Sounds promising. And what’s your personal take on blockchain and projects like Membrana? Do you feel that the time is right for them to come onto the financial stage?
CC: My own experience with blockchain and cryptocurrencies is fairly limited. I own several Bitcoins as savings (and don’t feel happy about its last 12 months performance) but don’t trade regularly. I adore the technology itself and see some great potential both in pure cryptocurrencies and in tokenization and digitalization of assets.I’ve been watching closely everything that is connected with security tokens and regulated exchanges for those. It seems that sooner or later they will be able to eat a big chunk of the global $50 trillion equity market. And once the procedures are introduced for fixed income sector, this can be even more revolutionary.Projects like Membrana are doing great job binding investors and asset managers. This sector has seen tremendous misconducts and scandalous thefts.
SP: Are you talking about Madoff or more recent incidents?
CC: Let me avoid mentioning names but Madoff was not the end of it: last year some of the biggest European private banking institutions were caught conducting fraudulent and forgery activities on client portfolios in excess of $1bn.If this is possible with the biggest clients supported by an army of accountants and lawyers, you can imagine the magnitude of risks for a small principal. And blockchain based solutions, including Membrana, are the remedy.Traditional financial world seems to be reluctant to these trends. Many industries are: natural gas markets had been pipeline dependent for decades until LNG started to change it; banking and remittance relied on cheques and unchipped credit cards and all of a sudden, mobile apps got into everyone’s smartphone.Stocks and bonds are no different: as soon as there is new convenient solution, old school infrastructure will become obsolete. We can never know the future but it is highly likely that this change will start in cryptocurrencies and then at some point “the consumer experience improvement plague” will move to classical markets.We all still have good chance of joining this move in its very beginning.
SP: What advice would you give to people currently considering investing in crypto?
CC: First of all, think long-term. Best investment returns come with big economic cycles and strategic bets on revolutionary technologies, if we are talking equity. Second, diversify your portfolio. Don’t focus of any particular position; the crypto market is very young and technology can change rapidly quickly dismissing the leaders of today. Third, get ready to losses as venture investments bear significant risks and 90 percent of projects or more will disappear naturally. Fourth, limit crypto exposure in your total portfolio, and don’t panic sale on downside moves.Finally, consider infrastructure investments; remember the metaphor of gold miners and shovel sellers. Membrana looks like one of the good cases that will be offering its services to the broad market.
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