Reinsurance is not typically associated with accessibility. Historically, investing in this risk-remote, uncorrelated asset class has been the domain of pension funds and endowments with ticket sizes well into the hundreds of millions. But according to Lloyd Wahed, CEO of MembersCap, that model is long overdue a rethink.
“Tokenisation allows us to bring this type of opportunity to a broader range of allocators,” he explains. “Reinsurance offers strong, stable returns that are uncorrelated to volatility in the broader financial markets — particularly valuable in today’s macro environment, and especially digital assets. But until now, it’s been completely out of reach for smaller institutions, family offices and high-net-worth individuals.”
Access and alignment
MembersCap’s flagship offering — MCM Fund I — is structured as a traditional reinsurance fund. The firm has spent years building relationships with the biggest reinsurers in the world, enabling access to the uppermost layers of risk. “We operate at the top of the tower,” says Wahed. “That’s how we’re able to generate attractive yield in a risk-remote way.”
The difference, he says, is not in the portfolio — it is in the distribution. By tokenising the fund, MembersCap can make fractional ownership available via digital marketplaces. “You no longer need US$100 million to get involved,” says Wahed. “Through tokenisation, we can break that down into smaller units. That allows people to invest US$250,000 or US$2.5 million — or in some cases far less — and still benefit from the same reinsurance structure.”
He believes this represents a much-needed middle ground in the blockchain investment space. “Right now, you see either exotic high-risk strategies aiming for 20 per cent-plus returns, or vanilla money market funds yielding four or five per cent. Reinsurance fills the gap between those two.”
Global reach, local nuance
Investor appetite for this model has been widespread, with demand coming from London, New York, Switzerland, Singapore, Japan and beyond. “There’s no walled garden here,” says Wahed. “This is a global opportunity.” Wahed and his co-founder and co-managing partner, Patrick Barrett – previously a private equity and insurance partner at Morrison & Foerster LLP – have spent their careers working internationally and across borders, which they believe gives them the unique ability to operate globally.
That said, each region brings its own nuances.
“In Singapore, for example, the family office sector is booming — and those allocators are looking to protect capital by diversifying into uncorrelated assets, which fits our profile well. In parts of Southeast Asia and Latin America, we see more focus on payments and remittances. But there are allocators who understand and want access to what we are doing.”
He adds that the sweet spot — where blockchain, asset management and reinsurance all overlap — is currently Switzerland.
“In Zurich, people really understand all three of those disciplines. That’s why so many of our early partners are based there.”
Fund-first discipline
While tokenisation is the enabler, Wahed is quick to stress that MembersCap considers itself a fund first.
“Too many firms in this space start with the technology and then look for an asset. We started with the asset and an investment policy,” he says.
That meant building a business model that could meet the expectations of the world’s largest reinsurers, and pass the scrutiny that comes with that. “When we deployed our capital and traded with one of the most successful Lloyd’s of London syndicates, it was a pinch-yourself moment,” he says.
“It validated our belief that if we build a world-class business, the market will respond.”
Led by chief information officer Dr Benjamin Fox — an industry veteran formerly of Ontario Teachers’ and Hiscox — the investment team focuses on risk-remote structuring and portfolio diversification. “We aim for consistency,” says Wahed, “and a portfolio that is resilient in both good and bad years by always focussing within a band that reflects the underlying risk.”
Responsible tokenisation
Despite the growing buzz around tokenisation, Wahed believes the concept needs to be handled with care. “We have the ability to do a lot of things, such as create liquidity, market making, daily NAVs, but the question is: should we?”
To that end, the firm appointed Jeremy Williams as head of compliance for digital strategy to ensure any innovations align with risk and client protection. “The goal is long-term value for our investors,” says Wahed. “We are not chasing hype. If someone is coming into a reinsurance investment, we want them to stay for a year or more. That is when the compound benefits start to show.”
Phase one, he says, is access. Phase two is liquidity — but only when the ecosystem is ready for it. “You should not be trading in and out of reinsurance daily. This is a diversifying, uncorrelated asset in your portfolio. The benefit is in holding it.”
Building bridges
The journey Wahed describes is as much about integration as innovation. “Traditional institutions have become dramatically more open about their embrace of blockchain and digital assets. Everyone knew this had been going on quietly for years, but now they are very publicly voicing their long-term commitment to the space,” he says. “We’re seeing large organisations talk to us about how we can slot into their broader infrastructure — and that just would not have happened a few years ago.”
He believes MembersCap is well placed to act as a bridge. “Our role is to bring the rigour and regulatory frameworks of traditional finance together with the innovation and accessibility of blockchain. That is where the most exciting opportunities lie.”
Next phase
Looking ahead, Wahed says the focus will be on scale and distribution. “Portfolio quality will always come first. But the big change you’ll see from us in the next year is distribution — through platforms, marketplaces and partnerships across both the traditional and digital assets space.” The firm has recently hired one of the leaders in the tokenised funds space, Bruce Jackson, CFA, as chief capital officer and senior partner to lead this effort. Jackson was previously chief of digital assets at Apex Group.
He believes the firm’s early lead gives it a significant advantage. “No one has really cracked broader distribution of reinsurance, and certainly not across the worlds of TradFi and DeFi,” he says.
“We are pioneering that. And over the next three years, our mission is to give as many investors as possible access to this asset class — and help them become members.”
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