Crypto accounting and data processing firm Lukka has partnered with fund administrator Theorem Fund Services to provide same-day net asset value reporting capabilities to digital assets index fund Hashdex.
New York-based Lukka invented the first crypto tax calculator and is the first data services firm to help monitor fund performances and prepare auditable financial statements for crypto assets on a daily basis, CEO Jake Benson told CoinDesk.
“In a super volatile market, having daily liquidity is really advantageous,” Benson said, noting same-day reporting offers more protection for investors compared to monthly NAV reporting, which is the most common practice in the industry.
Lukka is testing out the new service on the Hashdex Digital Assets Index Fund (HDAI), which is a passive fund that follows its own index of 13 digital assets, including 75.5% bitcoin and 10.15% ethereum.
While the new service reduces the duration of reporting process, it would be able to price and audit underlying assets in an investment vehicle more accurately thanks to their patented technology, Benson said.
There are two key processes that currently challenge fund managers to evaluate digital assets including data collection from a variety of venues and data normalization, according to Benson.
“In the crypto industry, getting transactional data is a pretty intensive exercise,” Benson said.
Digital assets venues, ranging from crypto exchanges, crypto wallets, OTC desks to blockchains, require different data capture processes.
"We have an entire team of technologists and quality control just focused on maintaining connectors to all the different transactional venues to assemble the data," he said.
“When we're aggregating data, it's not just pulling down a fix fee from prime brokers
We are managing 30 to 40 different connectors.”
Normalizing crypto data is another challenge for the industry since there is not any standard identifier in this industry yet, Benson said, noting his firm has created reference data to solve the problem for institutional investors.
“I think everybody in the industry should be excited about this because it's just a representative milestone of the industry growing up,” Benson said.
Indeed, the industry is eager to implement same-day NAV reporting.
“Same-day NAV reporting is definitely a step in the right direction for not only launching funds, but also having investors be comfortable with buying them,” Kostya Etus, portfolio manager at CLS Investments, told CoinDesk.
Lukka CEO Jake Benson image via CoinDesk Archive