How to Invest in Crypto, Without the Carry

Dave Balter
4 min readDec 6, 2017

The House that Bogle Built isn’t simply a book about the creation of Vanguard Mutual Funds; it’s about the balls and nerve of Jack Bogle.

The guy essentially reinvented the concept of mutual funds with one incredibly simple trick: he provided shareholders the greatest portion of returns.

Before Bogle: astronomical commissions were paid to sales brokers, you covered the mutual fund’s high expenses, and then they took the majority of the investment returns.

After Bogle: No broker commissions, lower expenses to run the fund, and the shareholder took the majority of returns.

This became the Vanguard way.

John C. Bogle of Vanguard, in his early days

You can imagine how other mutual fund companies felt as Bogle flipped the entire industry on its head.

Today, we’re proud to announce Flipside Crypto Club 3. A process for investing in cryptocurrencies where the Members control the Club and returns actually go to you: the Club Member.

Club 3 follows up where Flipside Crypto’s Clubs 1 and 2 left off. Those Clubs were for experienced wealthy investors. This one is for folks with a little less capital to deploy.

Here’s how Flipside Crypto Club 3 works.

  • A limited number of individuals can invest $15,000, $30,000 or $45,000, and become members of Crypto Club 3.
  • The Club gets access to Flipside Crypto’s Github Crypto Index, Volatility Index, and Nodes Firehose Data to identify a basket of 14–16 cryptocurrencies (specifically ones which have a high likelihood of return over time).
  • The cryptocurrencies are acquired (balancing the ownership level to an allocation across an investment pyramid) and stored in digital wallets, and placed into a cold storage, encrypted solution.
  • Members pay a flat fee of $2,000 for us to run our software and club service for the first year (regardless of investment amount). If members would like Flipside Crypto to provide its software and services to the Club beyond the 1st year, it’s $500 for every 6 months.
  • Members can liquidate their holdings and transfer your cryptocurrency back to USD at any time —we use a 2-sig process so members actually custody the crypto themselves. And, there is no penalty or expense for liquidating.
  • The fun part is, club members get to vote on any suggested rebalancing. Votes happen in our Slack channel, where club members also share information and ideas an articles.
  • Note that we don’t believe in active trading. We mainly believe people should buy and hold (HODL). But if Club algorithms indicate a change should be made, it’s up to Club members to validate what the Club should do.
  • Members of Club 3 get access to Flipside Crypto’s Portfolio Dashboard, to check on the value of holdings at any time.
Flipside Crypto’s Portfolio Dashboard

The question we’re asked the most about our Clubs is why the flat fee instead of a carry?

A traditional fund model works like this. You pay 2/20 to be involved: 2% of your money goes to cover the company’s salary and expenses, and then 20% of the profit goes to those very same fund managers.

To me this feels like mutual funds before Bogle arrived. Yes, we could make a LOT more money if we charged 2/20. But to make 2/20 work, you need to raise a certain amount of capital (2% only covers so many expenses) and often you start to wind your axle around deal structures that optimize the 20%. This creates misalignment between the Investment Manager and Shareholder.

I’m not saying there aren’t good, moral, effective managers who charge 2/20, and of course many funds will deliver substantive returns. I’m just saying we decided to take a different route.

Why? This is your Club, we’re just helping set it up.

Your algorithms are really strong. Your process is really crisp. You make it really easy to get broad exposure into a the cryptocurrency market.

But you’re making much less than you could. Why? Why? Why?

I guess you should thank John Bogle for that.

The above references an opinion that is for information purposes only; is not intended to be an offer for sale and it is not intended to be investment advice. Seek a duly licensed professional for investment advice.

In the meantime, if you want to find more about Club 3, find us here. And clap below either way, so you can help your fellow traveler do some crypto investing.