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OK folks here's the answer, from someone who spent 10 years in the institutional business on the buy side. It's called "custody". And it's what Bitcoin doesn't have. If you're an institution and you invest in a fund, you don't wire funds to the fund manager. Your funds are wired to a custody bank, that holds your assets (the cash and the stocks the fund manager is buying). The fund manager never handles the cash himself, and never takes possession of the stocks himself. Now apply that to Bitcoin world. A Bitcoin fund manager actually controls the keys himself, he's essentially holding the assets himself. Very very few institutions would (or even could) go for an arrangement like this. Sure Dan Morehead (Pantera) might convince his old friends and clients to do it, but the real money wouldn't (couldn't) touch it. Look at Second Market: they list their "custodian" as "Second Market Holdings".
Somebody will solve this but until they do the flow will be a tiny trickle. Listing the Second Market Fund OTC will be a help, and normal custody arrangements will apply. But if I was the SEC, I'd be looking very carefully at the ownership of assets issue. It's probably also why the Winkelvii have not succeeded in getting their fund past the SEC. Add multi-sig into the mix...and you've got a lawyer's cluster on a grand scale.
Somebody will solve this but until they do the flow will be a tiny trickle. Listing the Second Market Fund OTC will be a help, and normal custody arrangements will apply. But if I was the SEC, I'd be looking very carefully at the ownership of assets issue. It's probably also why the Winkelvii have not succeeded in getting their fund past the SEC. Add multi-sig into the mix...and you've got a lawyer's cluster on a grand scale.