Why Digital Assets Managers Must Evolve Their Operating Models

The digital assets investment landscape has experienced remarkable growth in recent years, creating unprecedented opportunities for specialized investment managers. Despite this success, a significant gap remains between the operational sophistication of traditional financial institutions and many digital assets investment firms. This disparity represents both a challenge and an opportunity as the market continues to evolve toward greater institutional participation.

While digital assets Managers have built varying levels of operational infrastructure based on their individual strategies, few have developed operating models that align with the expectations and established standards of traditional finance. This operational maturity gap is increasingly becoming a competitive disadvantage as the market matures.

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The Origins of Operational Fragility

The relative operational immaturity among digital asset managers stems primarily from the nascent nature of the asset class itself. Traditional asset managers have had decades to build sophisticated, purpose-built systems and benefit from a robust ecosystem of third-party service providers that evolved alongside them. This lengthy development period allowed traditional finance to create comprehensive operational frameworks, with competitive pressure driving continuous innovation and establishing industry standards.

Digital asset managers, by contrast, have operated in a compressed timeline with dramatically different market dynamics.

Many successful digital asset managers achieved impressive returns through market timing and fundamental thesis development rather than superior operational capabilities. As cryptocurrency prices appreciated dramatically during bull markets, managers demonstrated success without necessarily investing in institutional-grade operating models. The dramatic returns made operational investment seem less urgent compared to the immediate benefits of market participation.

However, the digital assets market is now approaching an inflection point that will fundamentally alter the competitive landscape. Managers who have thrived in previous market cycles are beginning to recognize that sustained success in the next wave of adoption will require significant investment in their operating infrastructure. This realization is driven by converging competitive pressures of (1) Changing Investor Expectations, (2) Evolving Market Structure and Alpha Sources, and (3) Product Innovation & Differentiation

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[ 1 ] Changing Investor Expectations

The initial growth of the digital asset management sector was fueled primarily by crypto-native investors and speculative capital comfortable with the risk profile of the emerging asset class. These early investors prioritized potential outsized returns over operational considerations, often accepting significant operational risk as part of the investment proposition.

However, the majority of capital potentially entering the digital asset space now comes from institutional allocators with extensive experience in traditional finance. These sophisticated investors apply rigorous operational due diligence (ODD) frameworks that digital asset managers must satisfy to access this new capital. The gap between institutional investor expectations and current digital asset operating models represents a significant barrier to capturing these capital flows.

To successfully attract institutional allocations, digital asset managers must transform their operations to provide:

• Comprehensive risk management frameworks

• Robust internal controls and segregation of duties

• Independent fund administration and custody arrangements

• Transparent valuation methodologies

• Business continuity and disaster recovery capabilities

• Systematic compliance programs

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[ 2 ] Evolving Market Structure and Alpha Sources

As digital assets increase in adoption and market maturity, several structural shifts are occurring that directly impact operating model requirements:

• Decreasing Volatility and Market Inefficiencies - with broader institutional participation, markets are gradually becoming more efficient. The extreme volatility and arbitrage opportunities that characterized earlier market cycles are becoming less frequent and pronounced. This evolution means Managers can no longer rely solely on market timing or simple arbitrage strategies to generate outsized returns

• Increasing Strategy Complexity - To maintain performance in more efficient markets, managers are developing increasingly sophisticated investment strategies. These complex approaches include quantitative trading, options strategies, yield farming, systematic market making, and cross-chain arbitrage - create new optional requirements that simple infrastructure cannot adequately support

• Data-Driven Decision Making - The shift toward more sophisticated strategies places greater demands on data accessibility, timeliness, coverage, and integrity. Managers are now requiring comprehensive data infrastructure to identify and capitalize on increasingly nuanced opportunities. This data dependency creates new operational challenges around sourcing, validating, normalizing, and analyzing information across sometimes fragmented digital assets markets - and only further emphasized with emergence of AI

This will increasingly push Managers to differentiate their business and product suite in order to stay competitive.

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[ 3 ] Product Innovation & Differentiation

The intersection of capital attraction and alpha generation is driving managers toward product innovation. Unable to rely solely on spot token appreciation, Managers are creating differentiated investment products to capture investor attention and deploy capital efficiently. As Investment Products are the concatenation of both investment strategies and investment vehicles, the complexity multiplies quickly. For example, the evolution of these investment strategies might follow single spot representation, indexing, to active management. Whereby the complexity only increases with another dimension, being the evolution of investment vehicles to distribute these strategies - from trusts, open/closed ended funds, to ETPs/ETFs, and potentially tokenized funds. These new investment products introduce unique operating model requirements that will force Managers to rethink how they futureproof their business for the evolving needs of investment strategies and distribution mechanisms.

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The Cost of Doing Nothing

As such demands on Digital Assets Investment Managers evolve, those who fail to institutionalize their operating models will face significant challenges as the market matures:

• Capital Access Limitations - Without a robust operating model, Managers will struggle to satisfy institutional due diligence requirements, effectively eliminating themselves from consideration of the largest pools of potential capital. This constraint will increasingly impact growth prospects as institutional allocations become the primary driver of AUM expansion in the sectoral and become a “self-fulfilling prophecy” as those who are not willing to invest will lose out on subscriptions, limiting their AUM and thus their management fees that could be reinvested into their business

• Competitive Disadvantage - Operational constraints limit the investment strategy development and execution capabilities. Managers with superior infrastructure will gain advantages in execution, risk management, and strategy sophistication

• Regulatory Vulnerability - As regulatory scrutiny of digital assets Investment Managers increases globally, operational deficiencies create compliance risks that could threaten business continuity. Whereas, robust operating models provide the foundation for regulatory compliance and adaptability as requirements inevitably evolve as digital assets frameworks are rolled out

• Talent Acquisition Challenges - Top investment and operational talent increasingly demands institutional-quality infrastructure. Managers with substandard operating models and manually intensive workflows will struggle to attract and retain the expertise needed to succeed in more competitive markets

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Conclusion: The Strategic Importance of Operational Excellence

For digital assets Managers, the institutionalization of operating models has evolved from a future consideration to an immediate strategic imperative. As market structure evolves and institutional capital increasingly drives industry growth, operational capabilities will become a primary determinant of competitive success. The Managers who thrive in this maturing landscape will be those who recognize that operational excellence is not merely a cost center but a strategic investment that enables access to larger capital pools, supports more sophisticated investment strategies, and creates sustainable competitive advantages.

The path to institutionalization requires significant commitment, but the alternative represents an existential risk that forward-thinking managers can no longer accept. However, Managers can take a phased approach for building out their desired operating model that aligns with their business objectives - rather than a risky / expensive overhaul of their existing business.  

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QIS Risk Can Help Institutionalize Your Operating Model

QIS Risk has developed purpose-built technology solutions designed specially to help digital assets focused Investment Managers bridge the operational gap to traditional standards. Our platform addresses the unique challenges of digital assets operations while providing the robust infrastructure institutional investors expect. Our approach enables managers to accelerate their operational maturity through:

• Centralized Investment Data - Aggregating on-chain and off-chain data within a single platform (inclusive of traditional investment types)

• Books of Record Construction - Intra-day IBOR with the ability to see Shadow NAV for a given point-in-time

• Vesting Schedule Management - Consolidated tool to monitor future liquidity of private tokens across holdings and portfolios

• Risk & Performance - Automated calculations to enable analysis natively within a unified system

• Admin Reconciliation - Data transparency with continuous reconciliations to enhance data fidelity, ensure reporting accuracy, and better hold Fund Administrates accountable