What do digital asset managers do?
There seems to be lots of confusion around what digital asset managers actually do. For this SEO article, I wanted to tackle the phrase "digital asset manager job description." This article will tackle what a digital asset manager actually does, what type of people are digital asset managers, and how the field continues to develop.
Digital asset managers allocate funds on behalf of clients into cryptoassets, such as Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), and thousands of other coins. Digital asset managers' clients are called LPs, which stands for limited partners. Digital asset managers often charge limited partners a management fee and incentive fee to buy and sell funds on behalf of the client. A management fee is a fee that is paid to the clients right off the back for managing the clients funds.
How do digital asset managers make money?
For example, a digital asset manager could charge a 2% management fee. If a client gives the digital asset manager $10 million to manage, that means the manager immediately gets to keep $200,000, which is 2% of $10 million. A manager must use the management fee to pay any employees, service providers, research/data providers, technology costs, and rent that is required to keep the business up and running.
In addition to a management fee, a digital asset manager also charges the client an incentive fee. An incentive fee is what the manager makes from any profits generated on the client's capital. For example, let's say a digital asset manager charges a 20% incentive fee. If the manager is able to generate 100% returns for the client, boosting their capital from $10 million to $20 million, the manager has made the client $10 million. The manager would then make 20% of that $10 million for them self, or $2 million.
These payment structures are similar to what traditional fund managers charge their clients. That being said, a digital asset manager significantly differs from traditional fund managers in that they manage digital assets. Digital assets are unlike equities, fixed income, and commodities. Price is driven by different fundamentals, the types of buyers/sellers are different, and the types of strategies a digital asset manager deploys varies greatly.
In order to be a digital asset manager, one must partner with other firms in order to fulfill the needs of LP clients. Specifically, digital asset managers often need to hire lawyers, accountants, custody providers, fund administrators, and brokers. Lawyers are used to formally set up the fund structure and agreements with LPs. Accountants keep track of all of the administration expenses, taxes, and revenue stemming from the corporation which the fund is typically under. Custody providers hold the LP's funds, while fund administrators generate the statements that are sent to LPs regarding performance.
It is important to understand that a digital asset manager has a fiduciary duty towards the LP clients. A fiduciary duty means that the fund manager must act in the best interest of the client.
What do digital asset managers look like?
Digital asset managers come from a wide array of backgrounds. They are far more diverse than traditional asset managers. While many come from traditional finance, having traded other asset classes on behalf of clients before, other digital asset managers were previously founders of tech companies, employees of prominent digital asset companies, venture capitalists, endowment allocators, academics, and even CNBC News commentators. There is no "path" yet that has been defined to become a digital asset manager like there is in traditional finacne (IB -> HF Analyst -> HF Portfolio Manager -> HF Manager).