"Untapped Assets - The Trillion-Dollar Opportunity" – Free download of Chapter 2 of Assetization

Patrick Loepfe and Philippe A. Naegeli guide us through the uncharted territories of investment in Chapter 2. Here, they confront the prevailing sentiment of stagnation among investors and asset managers, characterized by limited opportunities and innovation. By introducing the concept of Assetization, they propose a transformative solution capable of unlocking the immense potential of non-bankable assets, estimated to be worth 78 trillion US dollars. This chapter not only highlights the magnitude of this opportunity but also suggests that the advent of Assetization might just be the beginning, with the potential to uncover even greater unknown prospects through innovative asset classes and strategies.For more, you can download the full chapter as a PDF.

Welcome to the Investment Frontier 

Imagine a world where anything and everything could be made investible. Where the value of even the most illiquid of assets could potentially be realized. Where asset managers had the tools to turn any idea or strategy into a bankable financial product. And where investors, no matter what the means at their disposal, would have access to alternative, exotic or non-standard investments that are not available to them today. 

This is the vision at the heart of Assetization. And as we mentioned in our introduction, it is also the opportunity of Assetization. An opportunity that can be measured in trillions upon trillions of dollars. And it's not just about money. By expanding the investment universe and greatly facilitating access to new investment opportunities, Assetization also stands for a fairer, more equitable financial system and, as a result, a more prosperous world. 

That's the good news. The bad news is, we aren't quite there yet. From the point of view of many investors and asset managers, there is still a lot of friction involved when trying to access this opportunity. Let us explain.

Say hello to Ada, Barbara and Clark 

In our short story that started on page 14, and continues throughout the book, we tell the tale of Ada, Barbara and Clark. We thought this might be a creative way of illustrating the kinds of challenges typically faced by the investors and asset managers that we work with every day, and who will be the frontline beneficiaries of Assetization. 

Young Ada is a successful millennial making the transition from youth to middle age. Like many in her generation, she is full of ideas and has very strong ideals. On the one hand, she is a dreamer, drawn to the new and innovative, unafraid of challenging the status quo. But she is also a doer, who likes to put her ideas into action. She is not afraid to take risks in pursuit of her goals, but she knows how to assess risk. She won't make foolish mistakes. Because she has already accumulated some wealth (and, at some point, can be expected to have more passed down from her parents), she represents not just the younger generation but also the next generation of investors. This generation is going to be much more demanding than previous ones. Ada's background in blockchain and crypto underscores that the younger generation is already familiar with the idea of finding alternatives to the existing financial system. She won't accept being told that "we don't do things that way". That said, she is still in the early days of her journey. There is much she still doesn't know about traditional investing. In this, she also embodies the intelligent "nonsavant" that the industry needs to cater to with education and information. 

Our second protagonist, Barbara, is typical of the independent asset managers that we work with. She has left her well-paid position at a private bank to go out on her own because she values her independence, but also because she feels that's the only way to provide a truly personalized, tailor-made service. She is quite serious about that. And she gets frustrated because she doesn't really have the opportunity to build the kind of product shelf she would like to, one that caters to demanding young clients like Ada, but also one that would let her do more for clients of all ages and situations. She has plenty of ideas. What she lacks are the tools to turn them into reality. That's not only frustrating in terms of being able to serve her clientele. As an asset manager, Barbara works in a highly competitive environment. If she had more freedom to put her ideas into action, to create more innovative products and services, she feels she could better differentiate herself from her competition. That would be good for business. And that's why, in our story, she jumps on the opportunity when it does arise. 

Finally there is Clark. He represents the most traditional parts of the system. He is a senior executive of a midsize bank and a member of the Group Managing Board as well as the Investment Committee. We could as easily have made him the Chief Financial Officer or Chief Investment Officer of a mid- to larger size corporation. Clark has the advantage of decades of industry experience. Highly intelligent and a voracious reader, he's very aware of how his industry is changing. He understands the disruption and opportunities brought about by new technologies and challenger institutions. But he too is constrained. Why? Firstly, there's the culture of his bank, represented by the bank's Chairman. But it's not just the Chairman. As anyone knows who has worked in large institutions, getting buy-in for new ideas can be difficult. People might like the ideas individually, but collectively there is often resistance. Part of the problem is structural, a result of the expensive systems, complex processes, and other constraints inherent in any large organization. Like supertankers, banks are hard to turn in a different direction. 

Secondly, while he may not realize it himself, as he comes into the late stages of his career, Clark is becoming increasingly risk averse himself. While he may fancy new ideas, he doesn't want to make any mistakes. He is all too aware of what that can mean to a career. So while in his way he is also searching for something new, it has to be familiar as well, to function within existing frameworks. 

What unites these three people is a general sense of being stuck. Of a lack of opportunity, lack of access, lack of innovation, and lack of tools. We think that Assetization can solve many of these problems. Assetization provides a toolkit to implement new investment ideas. By making all things bankable, we can unlock value and/or increase access to a large universe of assets that are currently lying dormant. We go into the details of how that works in the next chapter. Here, we'd first like to take a look at just how large that universe might be...

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