By Eimear Dodd
Blending the familiar with something new can lead to innovation. However, it can also be risky.
According to its website, Elpis Investments is a “cutting-edge hybrid investment management company that brings together digital and investment fund expertise with the fresh, game-changing approach of a start-up”.
The company has announced plans for a public ICO in January 2018 with a pre-sale for professional investors and venture capital from November 2017.
The start-up plans to build an Artificial Intelligence driven trading platform which is designed to invest in both traditional assets and cryptocurrencies to deliver a “hedge fund for regular people”.
https://youtu.be/71QILna_57g
How do they intend to do this?
The white paper sets out the four pillars of their approach:
- no management fees,
- transparency,
- risk management,
- AI
The first pillar is no management fees. Instead, Elpis will be paid based on fund performance, though the white paper does not detail how this would be calculated.
Transparency is the second pillar and it’s here that blockchain technologies are being used to enhance openness. Customers and regulators will be able to view trades and transactions in the public ledger of their buy/sell activities on the Elpis website. Blockchain may also help to reduce risks and transaction costs while increasing efficiency.
The remaining pillars rely on AI. Machine learning and AI trading are already established tools used by investment funds within the marketplace to detect patterns and adjust investment strategies. Elpis Investments plan to use new technologies to build a fully automated and transparent investment fund that requires limited human intervention thereby reducing risk and increasing performance.
Additionally, Elpis is planning to crowdsource a community of developers and engineers to build models following the approach already used by quantopian and numer.ai. Since there will be more information about the performance of investment models, blockchain also allows the original developer to be paid for their work with crypto-coin.
While this is an interesting approach, there are likely to be issues. For example, an AI trading platform may require limited human intervention, but its algorithms will not be entirely bias-free. Controls and process may be needed to identify and challenge implicit bias within the code.
The ICO
As a fundraising tool, start-ups can use ICOs to trade future crypto-coins for cryptocurrencies with immediate value. If the start-up is successful, the coin’s value will increase. Like any investment, there are risks notably with the uncertain status of the ICO.
Elpis is fundraising through a crypto equity ICO in partnership with CapchainX, a platform for creating, managing and trading equity on the Ethereum blockchain.
Crypto equity ICO is a type of token offering where the cryptographic tokens or coins are backed with company equity. Tokens representing a percentage of the company are created on the Ethereum Blockchain. This token could potentially be exchanged for share certificates in the future subject to verification and other criteria such as KYC (Know Your Customer) and AML (Anti-Money Laundering). Tokens exchanged for share certificates are then destroyed.
Elpis are targeting an initial amount of 20 million dollars with tokens representing a share of equity in the company similar to the more familiar process of an IPO.
The pre-sale ICO is scheduled to commence on 1 November 2017 when tokens will be sold privately to professional investors and venture capital. The public ICO launches on 1 January 2018 when tokens will also be offered to retail and other investors.
Additionally, the value of the token would also change in value in line with the Ethereum currency. There also appear to be plans to develop a secondary market for the Elpis tokens.
After the ICO, other investors can move their assets into the main investment fund based in Luxembourg. Digital assets obtained from the ICO will also be moved into this fund which will be managed from the United Kingdom. The main fund will then trade on both the stock exchange and the crypto market.
The company itself is very new. The UK’s Companies House register shows that Elpis’s holding company, AI UK Holdings, was incorporated in June 2017. Elpis’s website suggests there are fewer than 10 employees.
Marketing and networking are crucial for any start-up venture. Though it has a social media presence, activity has so far been minimal though this may increase once the pre-sale ICO starts. Advisors can also be invaluable and Elpis have identified a need for additional support here.
The hybrid approach of Elpis mixes familiar elements with the new. It is probably too early to judge if it can be successful in the marketplace.
