- Proposed fund will invest in companies involved in digital asset mining, applications, transactions, hardware and integration, as well as up to 25% in bitcoin futures
- Limiting the futures allocation could be an attempt by Global X to get to market quicker, says Morningstar’s director of global ETF research
As many fund firms have launched or filed for products focused on investing in blockchain companies or bitcoin futures, Global X revealed plans on Thursday to bring to market a product that does both.
The Global X Blockchain & Bitcoin Strategy ETF will primarily invest at least 80% of its net assets in blockchain companies and digital asset funds, as well as in long positions on US-listed bitcoin futures contracts, according to an Aug. 19 SEC disclosure.
The document did not indicate a ticker or expense ratio for the planned offering. A Global X spokesperson declined to comment beyond the filing.
Such companies and funds in which the ETF will invest include those that directly own “a material amount” of digital assets, the document notes, or derive at least half its revenue, or operating income from digital asset mining or blockchain applications, transactions, hardware and integration.
Like other funds investing in bitcoin futures, the actively managed Global X ETF seeks to gain exposure to these instruments and certain digital asset funds through investments in a subsidiary organized in the Cayman Islands. But the fund may not invest more than 25% of the fund’s total assets in the subsidiary at each quarter-end of its fiscal year, the filing states.
“Limiting the futures allocation may allay any concerns the SEC would have regarding capacity, given the limits on how much of a given futures contract the fund could own,” Ben Johnson, Morningstar’s director of global ETF research, told Blockworks. “It might be a play to get to market more quickly than those ETFs that have filed to own some combination of futures, trusts and Canada-listed ETFs.”
The filing is one of many to be filed in recent weeks, as some industry watchers have grown more pessimistic about the SEC approving an ETF that would physically hold bitcoin by the end of the year. Venture capitalist Kevin O’Leary recently told Blockworks that he didn’t expect the SEC to approve a bitcoin ETF until 2023.
Global X’s disclosure comes after the New York-based fund group last month launched its Blockchain ETF (BKCH). Later in July, the firm filed for an ETF that would hold bitcoin, joining about a dozen others awaiting approval from the SEC.
SEC Chairman Gary Gensler’s comments about potentially favoring ETFs limited to bitcoin futures have led many issuers to apply for products that do just that in the meantime.
ProShares parent company ProFunds several weeks ago brought to market the first publicly available US mutual fund or ETF designed to provide investment results that generally correspond to the performance of bitcoin.
“It would also be less messy from a tax perspective relative to a futures-focused product,” Johnson said of Global X’s latest proposed ETF. “My best guess is that this is a speed-to-market play on their part – similar to what we’ve seen with the recent mutual fund launches.”