Coinshares International Ltd

STO:CS

Earnings Call Analysis

Earnings Call Transcript 2023-Q3

[Operator]

Thank you for standing by, and welcome to the CoinShares' Q3 Earnings Broadcast. [Operator Instructions]. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your host, Jeri-Lea Brown. Thank you.

[Jeri-Lea Brown, executive]

Thank you, operator. I would like to welcome you all to the CoinShares' 2023 Q3 Earnings Call and webcast. Speaking from management today will be Jean-Marie Mognetti, Chief Executive Officer; and Richard Nash, Chief Financial Officer. All those joining today are encouraged to log into the live event where you'll be able to view the accompanying presentation during today's call. Alternatively, the results and a copy of the presentation are available to download from the Investor Relations section of the CoinShares' website. A replay of the webcast will be available for 30 days following the live call and a transcript will be posted on the company's website as soon as it is available.

Following the presentation, we will host a short Q&A via the webcast platform. Should you wish to submit a question to the management team, please provide your name and company affiliation. We will do our best to get to as many of these as we can in the allotted time.

Lastly, our safe harbor statement. CoinShares would like to remind everyone that except for historical information contained herein, statements made on today's call and webcast that constitute forward-looking statements are based on currently available information. The company assumes no responsibility to update any such forward-looking statements, and I would like to point you to the risk factors associated with our business, which are detailed in our prospectus.

At this time, I will turn the call over to Jean-Marie.

[Jean-Marie Mognetti, executive]

Good afternoon, everyone, and thank you for taking the time this Tuesday to join us and hear about CoinShares' activity during Q3 2023. Every quarter since Q2 2021, we discussed with our shareholders and analysts the significant transformation in our industry and how CoinShares is positioning itself in this evolving environment. Q3 2023 was no exception and a busy quarter, especially with U.S. lenses with 2 major trends being of interest. First, the ACC intensified scrutiny on certain players, which underscores the importance of strict adherence to regulations. We see that the core center of CoinShares strategy since its origin, albeit in the short term, it sometimes makes us appear too slow or not agile enough. However, in the medium term, our strategy has been right and continues to be the right one. sometimes perception is not reality.

On another hand, events such as a grayscale win over the SEC and the absence of appeal from the SEC tend to indicate digital assets growing acceptance in the global financial landscape. What the SEC is needing now is leadership to take the matter even further. So convergence of digital assets, innovation and regulatory structure is evident, and this is CoinShares know-how in Europe since 2014. We have long held the belief that the future resides in their seamless convergence a new form of financial movement 2.0.

Looking at markets now, a meaningful correlation as surface between bonds and equities add up to 34%, almost a record breaking. With this in mind, it is worth noting that Bitcoin is emerging as a powerful diversification option in your portfolio allocation. If you are interested to learn more about our thesis, I cannot recommend enough our Q3 paper radiated, augmented improved by [indiscernible] and his fantastic research team. It isn't vital, a little Bitcoin goes a long way, available on our website after a few disclaimers and delves deeper into this narrative and discovering Bitcoin's evolving role.

On the macro side, the federal reserve higher for longer rhetoric, coupled with geopolitical uncertainties to say the least creates a turbulent tenth macro backdrop. This environment pairs the convergence of decentralized and traditional finance fortifies Bitcoin position as a genuine investment asset and seems to remind the market of its strong value challenger positioning. So reflecting on all these developments, I'm truly optimistic about our industry's trajectory and CoinShare position within it. But before we keep digging into CoinShare business, let's took a look at our financials for the quarter. I will provide more detail insight afterwards.

But for now, I'll hand over to mic to Richard to discuss our Q3 2023 financial. Richard, over to you.

[Richard Nash, executive]

Thanks, Jean-Marie. So as we approach the end of the year, we're happy to report another quarter of profitability and the continued evidence of stability in the group's overall performance. As we can see from the overview slide here, our topline for the quarter stands at over GBP 16.7 million with a roughly even split between asset management and capital markets. giving us a total figure of GBP 19.8 million there, which is then reduced by the net losses that we saw in our principal investment portfolio of approximately GBP 3 million. So this brings our year-to-date top line performance to GBP 52.4 million, and a level of consistency quarter-on-quarter that is becoming a more established pattern as the business continues to grow.

The stability of our top line is also being echoed in the cost base of the group. The combined cost that bring us down to our adjusted EBITDA figure totaled GBP 6.9 million for the quarter, which gives us an adjusted EBITDA of GBP 9.9 million at a margin of 59%. As we've always stated that we aim to keep a tight control over our costs in order to allow the growth of the wider market to have as close to a direct impact as possible on our bottom line performance.

The margin for the quarter is therefore the same as the margin seen year-to-date and a significant improvement on 2022, which was heavily impacted by the turbulence of the wider market. While we're not yet back to the levels of performance we saw over the quarter of 2021, we are busy diversifying both our product suites and activities to fully benefit from the market. We are expecting our top line performance to further diversify as we move into 2024 as our newly launched Hedge Fund Solutions business begins to gather interest from both our existing and prospective customers.

Before we take a slightly closer look at our core business units, it's worth acknowledging that in the last few weeks, post quarter end, we have seen some significant price movement and reached highs for the year in both [ B2C and East ] we are hoping that as we close out the year, we are able to show continued stability and enjoy the benefits of these increases manifesting in our bottom line.

So on to our asset management platform now. And as always, just a reminder, the components of this business unit are the XBT Provider ETPs or CoinShares physical ETPs and the CoinShares BLOCK chain Global Equity Index or BLOCK index.

So the story here is very consistent with that of the overall group quarter and quarter stability. That is a reflection of the movements in the wider market, coupled with cost control and solid margins. As can be seen from the table here, the overall gross profit margin of the group's asset management platform remains very healthy. Total management fees for the year are now in excess of GBP 30.3 million and should the recent price increases hold to the end of the year, and this will be reflected in the management fees for Q4 accordingly.

Looking at the level of flow activity in our main products for the quarter, the CoinShares physical product suite generated inflows over Q3 of $6.7 million, bringing year-to-date inflows to just over $53.8 million. We previously acknowledged the trend within XBT provider of the outflows being largely stemmed and over Q3, XBT provided Products saw minimal [ net ] outflows of $30.8 million, bringing year-to-date outflows to $87.5 million.

The flows for both ETP product suites and those of our key competitors is published in our weekly digital bond disclosure report, which is available on our website. And additionally, the level of AUM held with each of our products is disclosed and subject to daily attestation by Ledger Lens, an independent firm solution embedded into our own website, which is designed to provide additional transparency and comfort to all of our stakeholders. And as always, we encourage everyone to go and take a look at both of those things.

Just as a quick summary to close out asset management platform at the end of the quarter, the level of AUM across our 2 ETP platforms, XBT and Physical stood at approximately GBP 1.53 billion with an additional GBP 420 million of AUM within the BLOCK index.

So moving on to capital markets now. The performance of the Group Capital Markets business over Q3 2023 demonstrates the benefit that diversification of activities comparing resulting in total other income and gains of just over GBP 9 million. With the turbulence and the exceptional losses of 2022 behind us and ongoing enhancements of the group's internal controls framework, we also achieved relatively consistent performance month-on-month and a stable gross profit margin for the quarter, averaging out at 77%.

Our staking income has yielded strong results for the quarter at just short of GBP 5 million, bringing the year-to-date total to approximately GBP 13.8 million. On the Delta Neutral trading strategy side, we've had GBP 0.8 million of gains, and this predominantly represents opportunities arising through in trading CME futures. The fixed income activities are also showing a good increase on 2022, and these levels have been achieved even against the backdrop of a far more selective approach to our lending counterparties following the events we saw over 2022. And then finally, we have a small amount of liquidity provisioning arising from supporting the group ETPs. And the reason why this is down on last year is due to the level of flow that we're seeing on XBT provider decreasing outflows have been largely stemmed.

Now just while I provide some brief closing comments, we can take a look at the quarterly performance of the group since the start of 2020 here on this graph here, which helps to visualize the quarter in context and the year in context.

Yes. So 2023 performance has been solid. The digital asset market is obviously a huge factor in this, but that can't be achieved without the combination of diverse activities, cost control and infrastructure improvements. So we continue to work hard on every quarter. We've always been focused on ensuring that our range of products and activities continue to evolve. And with the product suite of now 19 ETPs and the capital markets team is continually diversifying its reach in partnerships.

We believe we're well placed to reap the benefits of the remainder of the year and we can really see some interesting market developments on the horizon that will hopefully work out in our favor as we move into the new year.

And then finally, just worth reminding everyone that everything that we've touched upon here and much more financial information is included within the full earnings report that we released earlier today.

[Jean-Marie Mognetti, executive]

Thank you, Richard. As it is our custom, let's delve into our business line performance, and as usual, let's start with our asset management business.

So asset management, in Q3, European crypto ETP providers faced significant outflow due to a mix of stagnant market sentiment and tactical redemptions from institutions. Looking in more details, we can observe for CoinShares' physical the following 4 points.

Firstly, and in a few words, CoinShares' Physical fell ripple effect. It recorded its leanest quarter for inflows since inception with $6.7 million of net inflows for the period.

Secondly, our BitCoin offering both a brunt of this downturn with $3.8 million in net outflows during Q3.

Thirdly, our diversified altcoin product despite resilience, securing $10.5 million on inflow, reflecting our strategic market positioning.

And finally, in a similar positive vein, it's important to acknowledge that the investor composition of the CoinShare physical product suite shows greater market penetration, separating us from our competitors.

Now looking at our legacy products suite XBT Provider, there are 3 key takeaways. Our summer marketing campaigns specifically focused on the Swedish region for the XBT Provider platform, achieved favorable results, reflecting strong engagement and a reinforced brand presence. This campaign aimed at fortifying the XBT provider brands standing as a leading crypto-ETP issuer in the Nordic region.

Concurrently, the net outflows for XBT providers have been maintained at minimal levels. Indeed, XBT Provider exhibit commendable consistency with monthly net outflows stabilizing at $10 million despite the advanced age of the platform. So to sum up, last quarter, we held a dominant 50% market share in Europe, showcasing our leadership. We are firmly committed to strengthening our leading position in the European crypto ETP market by refining our strategies.

Turning quickly to the BLOCK Index. There were clear outflows among leading global Blockchain ETF funds, paralleling a 10.9% decrease in Bitcoin over the quarter. BLOCK Index contains declined to a mere 6.6%, thus outperforming Bitcoin's period and other comparable Blockchain products. This product continues to asset it's dominance, consistently distinguishing itself as a benchmark index.

So let's look now quickly at our capital market activity. We have focused our efforts this quarter on CME future trading strategies. Notably, the recent environment of historically low volatility, coupled with diminishing spot volume presented challenges. Nonetheless, our team showcased resilience and adaptability, ensuring sustained performance despite these obstacles.

We also prioritize the establishment of a robust infrastructure and a diligent framework for our staking and lending operation to increase our capital market revenues.

Furthermore, crypto exchanges in the post FTX environment are increasingly reluctant to be the custodian of client funds. This critical shift in the industry is a step towards a model realignment to traditional financial markets. We have championed this evolution for a long time. And in Q1 2023, we started the implementation of our custodian and exchange partners by developing all weather processes and legal frameworks, allowing us to mitigate and overall reduce our counterparty risks.

Lastly, a quick update on our strategic directions. Since Q2, as you know, we've been fast-tracking our move towards our Hedge Fund Solutions business. It is very inspiring to see the dedication of our traders, quant, developers and operation teams, they are all in on this project ensuring the smooth transition from pure capital market to capital market and Hedge Fund Solution and the launch of this new business.

So let's look a bit more on this new business now. What does it mean? So this September, we celebrated the pivotal moment, the official launch of our Hedge Fund Solutions business. We have expanded our reach, initiating talks with external LPs across Asia, Europe and for the very first time in the U.S. Through CoinShare Capital, our U.S. FINRA registered broker-dealer subsidiary, we are amplifying our marketing efforts for these investment strategies. We are now in a position to tap into the world's predominant asset management market, which is home to 50% of global AUM. With this launch, we are reinforcing our commitment to being a one-stop shop. What does that mean? Whether you are looking for Beta or Alpha exposure, we'll get you covered. And the best part, clients can now craft their own portfolio tailored to their risk appetite by just moving the cursor between the 2 buckets.

I'm also excited to share that our initial strategies have been up and running since the end of Q3 with a track record starting officially in August. Our team has been hard at work, not just generating Alpha, but also gearing up for the first external contribution. As we move forward, our aspiration is to see our strategies flourish, garner interest and set the stage for even more innovative strategies. Now let's take a quick look at our principal investment book.

During Q3, our principal investment portfolio reduced a net decrease of GBP 3 million. The primary factor beyond this decline was a devaluation of our FlowBank holdings. However, the decline was partly balanced out by the appreciation in several other assets within our portfolio. It's important to clarify that the accounting representation of FlowBank, given our significant shareholding as a factor in some positive events from 2023. A notable instance is the successful closure of its funding around in Q1, value at 2.5x our initial investment.

Before closing, let's look at our share price performance. At the end of September 23, our stock price has seen an impressive 85% uptick. Over the summer, we observed an average daily volume more than doubling. Furthermore, we achieved a record high in term of retail investor engagement, especially from the Nordics with achievements underscore our broader market acknowledgment of CoinShares' as a credible and investable entity.

All right. It's now time to conclude this review. So it has been encouraging to see the continued growth and increasing maturity of CoinShares' over the last 5 months.

In my many conversations with other players in the industry, it's clear that the perception of CoinShares among stakeholder client shareholders is changing and changing for the better. Step by step, CoinShares is moving into a new phase, and I thank you all for being with us on this journey.

With the closing Coinshares Management Q3 '23 remarks. Operator, you can now open the call for questions, please.

[Jeri-Lea Brown, executive]

Thank you, Jean-Marie. Firstly, we have a few questions from H.C. Wainright, which directs to 2 domains. The first is which being in line with all of the chatter about Bitcoin ETF approval in the U.S. What is your view on the approvals impact on the Bitcoin price whilst acknowledging that the U.S. government has approximately 390,000 Bitcoin to auction creating an overhang according to recent NYDIG Research.

[Jean-Marie Mognetti, executive]

Thanks Jeri. I think is, so we're going to talk about competitor. So the NYDIG Research effectively is quoting 390,000 being on held by U.S. Marshal -- they are the result of seizure. What is not saying in the research, and that's probably the deficiency of the research is that all these Bitcoin are still held until the court case are closed and the investigation are closed. So as long as this investigation is ongoing, there is no selling [ measure. ] Some of them might be sold in the past, anything in U.S. Marshal position has been auctioned and a company like Cumberland in the very first auction where the recipients and the winner is [ auction. ] So net-net, in general, this auction and proceed from processing from Sage and then being, I would say, captured by people over a long-term view and our long-term holder and not like sold in the market.

With regard to Bitcoin price the ETF, how is it impacting? There is clearly an asymmetry between offer and demand. We have always been big advocate that a strong shock on the demand side, on the constrained supply, we have exponential impact on price. [ Compliance ] will stop me from making a price prediction, so I will not go there, but we know it will be a significant improvement.

[Jeri-Lea Brown, executive]

Thank you very much. Next question, what impact might the new regulations in the U.K. have on the CoinShares business? It seems that crypto oversight has moved away from the FSA now.

[Jean-Marie Mognetti, executive]

So CoinShares is ready. CoinShares has been planning MICA and any kind of other implementation in Continental Europe and the extension in the U.K. is also something we've been looking at. So we are not too worried about the UK regulation as it stands. Our activity in the U.K. is very, very limited because there is a crypto -- there's a ban on crypto derivative and crypto ETP for distribution in the U.K. So our current, I would say, engagement is very, very limited in the U.K. So unless there is a tactical change from the FCA, the [ new PLA ] and the other authorities we will not be impacted if and when it becomes a reality, we are ready to deploy. We have the right licenses and we have the right.

[Jeri-Lea Brown, executive]

Thank you. How might CoinShares quantify institutional adoption in Europe. Most ETP interest has been generated by retail investors, but they're wondering if there's any evidence that institutions might show more interest than if there's any way to quantify that.

[Jean-Marie Mognetti, executive]

Yes. is this for me?

[Jeri-Lea Brown, executive]

Yes.

[Jean-Marie Mognetti, executive]

I don't want to steal from Richard. All right. So okay, on this 1 specifically, -- what we have seen is true, is like from our start in the crypto ETP world, retail has been in the driving seat in terms of asset gathering. It is still the case in Europe. However, we can see a trend happening with regards to institutional adoption. Institutional adoption is to a large degree condition by the implementation of MICA not only about the appointment but by the different authority in every single country, so in Europe. So MICA is kind of the gatekeeper. A lot of these institutions have looked at Crypto before. We're ready to make some commitments and get [ cold ] feet on the back of the FTX events last year, which show them that not everything is rosy and needs a bit of work. And I think the only way that we can [ confront them with by revising ] real regulation happening. That's for the European market.

[Jeri-Lea Brown, executive]

Thank you. Another 1 for you Jean Marie. Any [indiscernible] [ cycles ] there missing out and has driven crypto interest. We're wondering if CoinShares might be seeing some of that reflected in the recent trading trends.

[Jean-Marie Mognetti, executive]

Sorry. Okay. So fear of missing out. I was not sure was reading that properly. Fear of missing out I think, is impacting every single track. I think track missing out has been driving the AI kind of speculation in 2023, like it was driving the [ Tulipmania ] long, long time ago. So I think investor psychology is always a key factor in this kind of acceleration and that's what trigger trends. So there is some sign of people positioning themselves. There's still a lot of drive farther on the sideline. And I think we're just at the start of this movement.

[Jeri-Lea Brown, executive]

Thank you. I'll give you break now Jean-Marie.

[Jean-Marie Mognetti, executive]

Thanks, Jeri.

[Jeri-Lea Brown, executive]

With a question from our shareholders. [indiscernible]. Please, can you expand on the currency translation difference line item?

[Richard Nash, executive]

Sure. No problem. So the consolidated results for the CoinShares' Group are presented in GBP, it's the functional and presentation currency on a consolidated basis. However, 1 of the very important subsidiaries within the group is CoinShares' Capital Markets, and that's where the vast majority of our balance sheet is held. So on a consolidated basis, the vast majority of the balance sheet comes from CoinShares' Capital markets, which is actually denominated in U.S. dollars. So when the consolidation occurs from 1 period to the next, any significant movements in the GBP, USD FX rates will manifest as either a gain or loss, which is posted through other comprehensive income at bottom of the profit and loss statement. It's an accounting entry, it's not cash impacting or anything like that. It's a presentational accounting entry.

Over the first half of the year, the FX movement between GBP and USD resulted in quite a significant loss. Over Q3, that trend reversed, resulting in a gain. And as of the end of September, the net movement over that period is fairly negligible as the rate at the end of September is comparable to that at the start of the year. And so there will always be a bit of a movement there through other comprehensive income when doing that consolidation, if you have subsidiaries that are denominated in different currencies. As time goes on, because CoinShares' Capital Markets is such a large part of the group, it's federally the nerve center of the entire group. That strengthens the argument for us to actually consider changing our presentation on the functional currency of the entire group, which is something that we're looking at doing as we move into 2024. So if that does happen, and we move into a position where we're actually presenting the group results in USD and that movement in and of itself will more or less vanish, but it's all arising from what's happening within [ C & CM ].

[Jeri-Lea Brown, executive]

Thanks very much. Another one for you Richard. From Edison Group. What is the near-term marketing plan for the CoinShares' Physical platform?

[Richard Nash, executive]

Okay. Speaking a little bit on behalf of our Head of Marketing here. Yes, I'll give it a shot. So the One of the main focuses will be a continuation of what we know already works, which is a strategic partnerships with broker platforms. And they've been instrumental in driving inflows into our products. So we are going to carry on doing that. One of the things that's going to change moving into 2024 is a direct-to-consumer focused and marketing campaign in Germany. Again, replicating what we've done in the past in Sweden. So then, they are the 2 main things. But I think it's also important to remember that all of our marketing is underpinned by the research that we do and the ongoing content production that is available on our website for all to see, which is designed to continue to educate people about crypto and simultaneously hopefully creates our own profile on our brand, we're doing so.

[Jeri-Lea Brown, executive]

Thanks very much. Back you again Jean-Marie. [indiscernible] from Edison. In your quarterly report, you said that investor composition of the CoinShares' Physical product suite demonstrates a continued improvement in market penetration in contrast to your competitors. Can you provide some additional comments on this?

[Jean-Marie Mognetti, executive]

Yes. We try to do some exercise where we isolate effectively from the data available or more specifically the share count, what is held for purpose of long-term investment and what is held for purpose of short-term speculation on the basis trade action, for instance. So some people can hold CoinShare Physical for long-term appreciation and some people can hold it as a long line against a short line on CME. The long line is short line on CME is a kind of [ trail ] which created a lot of fluctuation in AUM and will create a massive amount of inflow and potentially a lot of outflow when the base is collapsed. So once you isolate this kind of, I would say, investor activity from your share count and this investor activity being the 1 not paying long-term fee but paying very short-term fee. You can see that CoinShares penetration in the retail market and the market in general across Europe is in constant growth versus some of our competitors, which are slightly declining or static.

[Jeri-Lea Brown, executive]

Thanks very much. On the understanding that the current variant staking yield is close to 4% which is driven by the current amount of variant stake and the network activity. What are your expectations in terms of the current stake income over the coming months?

[Jean-Marie Mognetti, executive]

Okay. Now we're going to give a technical. Okay. So staking yield [indiscernible] I'm thinking into -- there's a few parameters to take into consideration instead of giving announce, which will be like out of the blue. So right now, there is around 23% of the network, which is stake. The staking rewards come from 2 things. They come from the consensus layer and they come from the execution layer. Right now, we have a very dynamic consensus layer, which is paying what is supposed to be paying and will suffer a decay as there is more and more, I would say, state if on the network and then you have the execution layer, which right now is very weak. We're talking about 0.95% right now out of the total APR. And this execution layer is a function of how much execution is happening on the network effectively. How many transaction are clearing out the network. So as activity on different L2s such as Base, Goals and new announced L2 from Kraken is taking off. You will see basically different layer start to compensate and go back up. So it's not just going to be declining, it can start to go up. So to come back to your question, where is it going to be in the 1 year. If you ask the same question to Vitalik year ago, Vitalik would have said my terminal value is 1.5%. I think we will be there in 6 months. So by September, Vitalik was expecting to be at 1.5%. Now the market is proving him wrong for various reason. A, as there is some more interesting trade to do and staking in the market. And proof of that is like the queue on the stacking capacity, which was up to 6 days to deploy validators is now down to 0 or close to 0. I think we're talking 39 hours. So this kind of collapse is indicating that the market, as it stands, as I would say, reach a state of maturity in terms of lines of capacity who wants to be state. We are monitoring this queue very closely because as soon as this queue start to grow, that's why we're going to see an acceleration in the PK.

Now where would it be in 1 year time, I think when the regional line at projection and building our budget and different part of projection. We're keeping it on a very, very low decade for the year upcoming. And like 3.5% is probably where we will be looking at, and this number can be, I would say, up or down depending on the activity on the execution layer. So more activity, we're certainly giving more boost, less activity, so we're giving less. So net-net, I think 3.5% for the end of 2024 is a good target.

[Jeri-Lea Brown, executive]

Thanks very much. And in terms of CoinShares Physical Ethereum TP holders, when will CoinShares be live with the Ethereum staking?

[Jean-Marie Mognetti, executive]

That's another good question. Look, there is a different way to do it. There is a way to do it like a pirate and to do it properly. And in CoinShares' unfortunately or fortunately, sometime, we want to do it the proper way. So I know it's not what everybody wants, but it has to be done in -- by respecting the rules of engagement of this very complex ETF and ETPs and other SPV, and we have to request a vote from the members. The product being issued in the U.K. listed in Germany and other countries and make it extremely complicated to get people to vote and people are [ not older to ] vote on the proposal. So we already add a cycle of both which didn't reach, with nobody show up, there's nothing shareholders showing up. So into we do another cycle of vote to make sure we can, I would say, turn on the functionality of staking. Everything is ready. Our partners are ready. Our infrastructure is ready -- everything is ready to go. We're just missing this crucial last piece of vote to be able to turn the staking reward on our ETPs. I know the team is working very hard on that front to convince some shareholders to join the call and vote at the AGM. But hopefully, next one will be a more successful than this one.

[Jeri-Lea Brown, executive]

Thanks very much. Just moving back to HCW. Jean Marie, are there any quantifiable measures of the Invesco partnership that might indicate how North American market is receiving CoinShares' linked products.

[Jean-Marie Mognetti, executive]

Okay No, there is none because it's not distributed in North America. It is -- this is in Mexico, we said, but it's not listed in the U.S. or in Canada, as [ remit of Invesco ] North America, and we are only trading with Invesco EMEA. However, if -- an extension of his question is how is our product received versus as an EMEA version versus the North American version of Invesco. I think the equivalent of our product in the U.S. by Invesco has $5 billion of AUM, which is a fraction of what we have. So operator has been very successful on that front.

[Jeri-Lea Brown, executive]

Thank you. And then the final question please could you add some color for the hedge fund solutions. How is the product going to the market and distributed? And how exactly has CoinShares' received best SEC approval or please discuss the situation.

[Jean-Marie Mognetti, executive]

Thanks, Jeri. That's a [indiscernible] question, I think. So yes, so this -- the distribution effectively is driven from broker dealer. Our broker is senior approved. The broker dealer, I would say, rules of engagement is at the state level. So you have to be approved state by state. So our broker dealer right now is approved -- I think 35 states, if it is not close to 40. We should be all done by the end of the year to have capacity to distribute in the entire U.S. Our product are not American product, our products are, I would say, Jersey-based SPV with a feeder, which is a Delaware feeder. So it's a master feeder typical structure for Hedge Fund. We have an offshore feeder and onshore U.S. Delaware feeder, which allows U.S. taxable investors to allow in the product. So it's a very common structure, which you will see in most Hedge Fund.

[Jeri-Lea Brown, executive]

Great. Thank you very much. That concludes the questions for today. We'd like to thank everyone for joining.