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Jeroen Blokland introduces the Blokland Sound Money Fund, a new investment fund that invests exclusively in physical gold and bitcoin. Each month, a data-driven strategy determines the optimal allocation between these two scarce assets. How does the fund determine how much to invest in gold and how much in bitcoin?
I am incredibly proud to share that we have launched our second investment fund: the Blokland Sound Money Fund. A fund that invests exclusively in two genuinely scarce assets: physical gold and bitcoin.
I probably do not need to spend much time explaining to Holland Gold readers why we believe scarce assets will play an increasingly important role. Rising debt, money creation, inflation and geopolitical tensions are putting our money and the financial system under pressure. The main question is what investors can use to counterbalance these forces.
Gold is an obvious choice in this regard. It has a history spanning thousands of years as money and as the foundation of trust underpinning our monetary system. But in addition to gold, we also see an important role for bitcoin. Bitcoin shares a crucial characteristic with gold: it is inherently scarce. In bitcoin’s case, that scarcity is even precisely predetermined. Moreover, bitcoin was created for our digital world and, like physical gold, has no issuing authority.
But deciding that you want to invest in both gold and bitcoin is only the beginning.
How much should you subsequently invest in physical gold and how much in bitcoin? Do you opt for a 50/50 allocation? Because of bitcoin’s much greater price volatility, it would then quickly account for a much larger share of the overall risk. Would 75% gold and 25% bitcoin be better? You cannot know that either, because the characteristics, and therefore the risks, of both assets change over time.
This is precisely where much of the Blokland Sound Money Fund’s added value lies. The fund is not simply a basket of gold and bitcoin, but a single, comprehensive investment strategy. This means that you no longer have to make all the adjustments yourself.
Every month, our data-driven strategy recalculates the optimal allocation between gold and bitcoin. To do so, we combine three proven factors drawn from leading financial research: risk, valuation and sentiment.
Risk is our starting point. We determine the weightings in such a way that gold and bitcoin each contribute equally to the portfolio’s overall risk. We then use valuation as a weighting factor. For bitcoin, the Power Law plays an important role as a long-term valuation anchor. Finally, we consider sentiment, or momentum. Investments with strong momentum are given a higher weighting, while the opposite applies when momentum is weak.
In this way, the allocation between gold and bitcoin is not chosen arbitrarily or set just once, but adjusted deliberately as circumstances change.
Of course, we have also examined how our strategy would have performed in the past. Since 2016, the strategy would not have produced a negative return over any rolling 36-month period. This emphatically does not mean that losses cannot occur in the interim. It is an observation based on historical data. Nevertheless, the simulation illustrates why this combination is so interesting. Historically, combining gold and bitcoin based on risk, valuation and sentiment has produced an attractive risk-return profile.
We have also deliberately opted for direct ownership when implementing the strategy. Like the Blokland Smart Multi-Asset Fund, the fund invests directly in physical gold and bitcoin rather than through ETFs or derivatives. The gold is fully allocated, while for bitcoin we work with several independent custodians. After all, exposure to an asset’s price is not the same as actual legal ownership.
That is ultimately what the Blokland Sound Money Fund is all about for me. If you want both gold and bitcoin, there is now a way to combine them professionally within a single fund, without having to continually determine and adjust the allocation yourself.
I am incredibly pleased that we can now offer this fund to investors. I would also like to thank Holland Gold in particular for its trust and cooperation as one of our partners. It is wonderful to take this next step together with a company that has championed the importance of physical gold and scarcity for many years.
