Alloco Research | September 2026
A month in Bhutan was long enough for the country to stop feeling like a backdrop.
We arrived through Paro expecting the landscape to dominate the experience. The descent into the valley, the mountains breaking through low cloud and the whitewashed buildings made that hard to resist at first. Over the following weeks, however, conversations about energy, institutions and financial markets gradually became a more useful way of understanding the country.
Some of those conversations took place during the YZi Labs programme in Thimphu; others continued over dinner at Aman, where people from different parts of finance and technology stayed at the table long after the formal discussions had ended. Conversations about markets drifted easily into energy, regulation and the ways capital travels between jurisdictions.
Over the course of the month, conversations that had begun in different corners started to converge on a more familiar question: what happens to the value of an asset when the infrastructure around it changes. Bhutan's hydropower already earns a return through electricity exports, while data centres create another possible use for the same resource at the cost of additional capital and forgone power sales. Gelephu Mindfulness City approaches the problem from the institutional side, through an attempt to reduce the risk attached to long-term investment by building a separate legal and regulatory framework.
The discussions around tokenisation in Thimphu brought a financial-market version of the same issue into view. New rails can make an asset or strategy easier to issue, hold and distribute, while leaving questions of valuation, liquidity and expected return largely where they were. That distinction is relevant to Alloco's work on hedge fund strategies and pre-IPO tokenization, where onchain infrastructure can change the way investors obtain exposure without replacing the investment process underneath it.
Hydropower, Compute and Capital Allocation
Bhutan has roughly 3.6GW of operational hydropower capacity. Druk Holding and Investments has outlined further hydro and solar development and identified 3GW of future hydropower capacity for sustainable AI data centres. The expansion of AI infrastructure has made reliable low-carbon electricity more economically valuable, giving Bhutan a possible domestic use for power that has historically been exported.
Bhutan exported approximately 7.1TWh of electricity in 2025, generating Nu 24.7 bn in revenue, while importing around 1.1TWh during the same year. The combination reflects the seasonality of hydropower generation, with winter output falling to as little as about 20 per cent of peak-season levels.
For a data centre operating throughout the year, the relevant constraint is the availability of firm power.
Electricity committed to compute also carries an opportunity cost: at Bhutan's average realised 2025 export price of roughly Nu3.47 per kWh, a 100MW facility running at 90 per cent utilisation would consume about 0.79TWh annually, equivalent to around Nu 2.7 bn of forgone export revenue.
Repurposing that power for compute also requires substantial additional capital. JLL estimates that global shell-and-core construction costs for data centres will reach approximately $11.3mn per MW in 2026 before tenant technology fit-out, while AI hardware can add as much as $25mn per MW. Hydroelectric assets can remain productive for decades, whereas GPUs and related computing equipment operate on considerably shorter replacement cycles.
The proposed scale makes these trade-offs material for the country as a whole. SATO Technologies announced a non-binding letter of intent in July 2026 for a phased AI data-centre campus in Gelephu, beginning with 5MW, reserving as much as 100MW of firm power and allowing for a potential expansion to 500MW. At 90 per cent utilisation, a 500MW facility would consume close to 3.9TWh annually, more than half of Bhutan's 2025 electricity exports by volume.
At that scale, the economics extend beyond those of an individual data-centre project. Committing 500MW to compute would redirect a substantial share of a resource that already generates export revenue and whose availability varies sharply across seasons. The return from the additional computing capacity would therefore have to be considered against the value of power exports, other domestic uses of electricity and the capital required to build and periodically replace the hardware.
That allocation problem leads naturally to a second question: who is willing to finance the infrastructure required to make it possible, and on what terms. Large data centres, power projects and transport infrastructure require capital to be committed for long periods, which makes the legal and regulatory environment part of the investment calculation. Gelephu Mindfulness City is Bhutan's most ambitious attempt to alter those conditions.
Gelephu and the Institutional Cost of Capital
GMC is building a separate legal and regulatory framework intended to support long-duration investment. Its legislation includes its own Companies Act, Financial Services Act, Income Tax Act and Employment Act, while the Gelephu Financial Services Office serves as regulator for traditional financial services and digital assets. The initial financial-services framework drew on Abu Dhabi Global Market law and English common-law principles, with GMC-specific rules expected to develop over time.
These arrangements have a direct bearing on infrastructure valuation. A power plant, airport or data centre requires substantial capital before it produces its expected cash flows, and the resulting asset is difficult to relocate. Investors therefore incorporate regulation, taxation, contractual rights and enforcement into the return they require over the life of the project.
If the framework proves credible, the effect should eventually appear in financing terms. Lower perceived risk can reduce required returns and extend financing maturities, increasing the range of projects able to attract capital. For an asset expected to produce cash flows over 20 or 30 years, even a modest movement in the discount rate can materially alter present value.
GMC's experiment is ultimately about whether a new framework can alter the terms on which capital is willing to commit for long periods, which is also relevant to onchain financial products whose credibility depends on the legal and operational structure surrounding the token.
From Institutional to Financial Infrastructure
That institutional experiment was one part of what we were watching in Bhutan. In Thimphu, the YZi Labs programme was concerned with a different part of the financial system. The discussions around real-world assets were less about the conditions under which capital enters a jurisdiction and more about the infrastructure through which investors can hold, trade and use financial exposures once they exist.
BNB Chain, Solana and Ethereum were among the principal venues discussed for onchain equities, with development also taking place across Hyperliquid and Canton. Morpho and Aave came up in conversations around vault curation, yield generation using RWA equities and looping strategies, while CZ identified onchain equities and commodities as areas with considerable room to develop.
For Alloco, this part of the discussion was more directly relevant. Tokenised public equities largely place a new distribution layer around securities whose pricing, disclosure and liquidity already exist in conventional markets. Hedge fund strategies and pre-IPO tokenization are more complicated because the investor is buying an exposure whose economics depend on portfolio management, valuation, security rights and liquidity as well as on the infrastructure through which it is distributed.
Liquid Strategies Onchain
Traditional hedge fund structures combine portfolio management with fund administration, ownership records, valuation and dealing arrangements. Investors subscribe to a vehicle that holds the assets and liabilities of the strategy, while administrators calculate NAV and subscriptions or redemptions take place according to defined terms.
An onchain structure can reorganise parts of that arrangement without requiring the underlying portfolio to leave the markets in which it trades. A manager can continue using conventional exchanges, brokers and custodians where appropriate, while the investor-facing exposure is represented through onchain infrastructure. Depending on the structure, this can make ownership records more programmable and reduce some of the administrative friction around distribution.
The investment analysis remains tied to the portfolio. Leverage, concentration, drawdowns, liquidity, correlations and the sources of historical returns still determine the risk taken by the investor. Valuation and dealing arrangements also have to reflect the liquidity of the underlying strategy, particularly when the investor-facing instrument can be transferred or redeemed more frequently than the positions inside the portfolio can be unwound.
This relationship becomes particularly important during periods of market stress. Technical transferability at the vehicle level can coexist with deteriorating liquidity in the underlying market, making the design of valuation and dealing terms part of the investment structure rather than a separate operational concern.
For Alloco, the relevance of onchain hedge fund strategies lies in applying a different ownership and distribution architecture to an existing form of alternative investment while keeping the economic exposure anchored to the performance and risk characteristics of the managed portfolio.
Pre-IPO Portfolios Onchain
Private markets begin from a less standardised position.
Private companies release information less regularly than listed businesses, transactions occur through negotiated financings or secondary sales, and securities issued by the same company can carry different economic and governance rights. The valuation established in the latest primary round can remain visible after financing conditions have changed, while individual secondary transactions may reflect the circumstances of the seller as much as a broad market assessment of the business.
Existing shareholders and insiders may also have an informational advantage over prospective buyers. Buyers can respond by demanding discounts, while holders of stronger assets may be less willing to transact at those prices, limiting market depth. Easier transfer infrastructure can reduce the cost of administration without resolving the disclosure and information problems that affect price discovery.
Private-market access has historically depended on relationships, minimum investment sizes, legal infrastructure and the ability to execute negotiated transactions. Tokenisation can lower some of those barriers and widen the distribution of private securities, which increases the importance of distinguishing access from investment quality.
For a late-stage or pre-IPO investment, the company name provides only part of the information required. The transaction price determines how much future growth is already embedded in the valuation, while the share class can alter the investor's economic and governance rights. The expected timing of an IPO or other liquidity event also affects the duration of the position and the return required for holding it.
Portfolio construction can reduce some company-specific risk by spreading exposure across several late-stage businesses, although the portfolio remains sensitive to broader conditions in interest rates, venture financing, IPO markets and risk appetite. Entry valuation continues to affect the return available across the portfolio.
Liquidity has to be considered separately at the level of the vehicle and the securities it owns. An onchain interest in a portfolio may be transferable more frequently than the underlying private shares, allowing the market price of the vehicle to diverge from the value assigned to its holdings. Closed-end funds provide a familiar precedent for this relationship between a tradable wrapper and a less liquid portfolio.
Alloco's onchain pre-IPO work is therefore centred on portfolio exposure rather than the distribution of individual company names alone. The structure can broaden the ways investors participate in late-stage private markets, while the investment process still has to address company selection, security terms, entry valuation and the expected route to liquidity.
As access improves, those decisions are likely to account for more of the difference between products because the mechanics of obtaining the exposure become easier to reproduce.
A Month in Bhutan
By the end of the month, Bhutan had given us a more concrete way of thinking about issues that can otherwise become abstract in discussions of financial infrastructure.
Hydropower showed the economics of putting an existing resource to another use once additional capital is introduced. GMC brought the cost of institutional risk into the same discussion by showing how legal and regulatory arrangements can affect the return demanded by investors. The conversations in Thimphu extended both subjects into financial markets, where new infrastructure is changing the way investors can hold individual securities and increasingly the way managed strategies can be distributed.
Those observations are relevant to the two areas Alloco is developing. Liquid hedge fund strategies depend on portfolio management in markets where pricing and liquidity largely already exist, while pre-IPO portfolios require more work around valuation, security rights and the timing of liquidity. Onchain infrastructure can alter how investors subscribe to, hold and transfer both types of exposure, while the economic results continue to depend on the strategy and assets underneath.
What we brought home was a more specific way of thinking about the relationship between investment infrastructure and investment returns. The former can change quickly and can materially broaden the ways capital reaches an opportunity; the latter still has to be assessed through price, risk, liquidity and time.
We will probably remember the month through less analytical details: the descent into Paro, the roads through the mountains, the long table at Aman and evenings when conversations that began with markets continued into energy, institutions and the choices people make about where to spend their time and capital.