IDX Plots Bitcoin, Ether Futures Mutual Funds

After asset manager IDX Digital Assets launched a pair of risk-managed crypto trusts, the firm is now seeking to launch mutual funds focused on investing in bitcoin and Ethereum futures contracts.  

The Phoenix, Arizona-based company filed with the SEC on Aug. 13 to launch the IDX Risk-Managed Bitcoin Fund. 

The proposed fund would primarily invest in bitcoin futures contracts and in pooled investment vehicles, including companies, that invest directly or indirectly in bitcoin. The planned offering would not invest in bitcoin or other digital assets directly, or in the Grayscale Bitcoin Trust, the document notes.

More recently, IDX filed to launch the proposed IDX Risk-Managed Ethereum Fund, according to an Aug. 30 SEC disclosure. Like the proposed bitcoin fund, it would mainly invest in Ether futures contracts and pooled investment vehicles, but not crypto directly.

Both proposed funds would cost $2.74 and $2.49 for the investor and institutional class shares, respectively, the documents note.

When the firm started offering its risk-managed crypto solutions to investors in 2019, it saw a large and growing demand across all types of investors for a risk-conscious way to access bitcoin and Ethereum, said IDX CEO Andrew Swan.

“IDX seeks to make it easy for fiduciaries like financial advisors and institutional investors to own digital assets, like bitcoin, Ethereum, and DeFi,” Swan told Blockworks in an email. “…We believe that delivering such a solution ultimately provides a more accessible and palatable entry point for investors beyond the high-net-worth individuals and family offices that are comfortable with underwriting large volatility and drawdowns.”

The filings come after IDX announced last month that it had launched the IDX Risk-Managed Bitcoin Trust and the IDX Risk-Managed Ethereum Trust. The firm noted at the time that these are the first-ever investment trusts designed to provide risk-managed exposure to crypto assets with the ability to go 100% to cash.

Unlike the latest planned mutual funds that would trade and settle the strategy through futures, the trusts trade and custody bitcoin and Ethereum directly via Coinbase.

Crypto futures mutual funds vs. ETFs

ProFunds launched a mutual fund in July that primarily invests in bitcoin futures contracts. The firm has marketed the offering as the the first publicly-available US mutual fund or exchange-traded fund (ETF) designed to provide investment results that generally correspond to the performance of bitcoin

A swathe of ETF issuers have filed for bitcoin futures ETFs, which SEC Chairman Gary Gensler hinted during a virtual forum in early-August could be looked upon more favorably by the agency.

VanEck and ProShares also filed to launch ETFs that would invest in Ether futures contracts, but withdrew their applications just days later. Industry watchers said at the time that the withdrawals signaled that the SEC likely told the firms that Ether futures ETFs would have a hard time gaining approval.

Swan said he believes a mutual fund is the perfect vehicle for a risk-managed investment strategy that varies its exposures over time, whereas an ETF has additional complexities in its distribution mechanism as it seeks to allow for intraday liquidity.

“We are having ongoing discussions with regulators on the topics of risk, liquidity, product structuring, and regulatory frameworks for the asset class, and it seems like only a matter of time before both regulators, investment managers like IDX and investors are comfortable with the structuring of offerings in the space,” the CEO explained. “While ETFs are generally a very good wrapper for most investments, digital assets is one area in which, we believe, a mutual fund makes more sense for the time being.”

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