Macro Funds Aim To Add Exposures to Bitcoin Futures, Crypto ETFs

A mutual fund by LoCorr Funds and an ETF by Arrow Funds propose to invest in the cryptoasset indirectly


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key takeaways

  • The proposal comes amid trend of asset managers adding bitcoin exposure to commodity- and inflation-focused funds
  • BlackRock, Morgan Stanley and Neuberger Berman are among other asset managers that have mutual funds investing in bitcoin futures, ETFs or the GBTC

Two more fund groups are looking to offer indirect bitcoin exposure through established products running macro strategies — pending regulatory approval.

LoCorr Funds and Arrow Funds are planning to add bitcoin exposure to a mutual fund and an ETF, respectively, by investing in bitcoin futures or bitcoin ETFs, regulatory filings indicate.

The LoCorr Macro Strategies Fund (LFMAX), which has roughly $1.4 billion of assets, invests in managed futures and fixed-income instruments. The mutual fund can take long or short positions in futures, forwards, options, spot contracts or swaps that are tied to currencies, interest rates, stock market indices, energy resources, metals or agricultural products.

“The fund may also invest in exchange-traded bitcoin futures contracts,” according to a SEC disclosure Monday. “These derivative instruments are used as substitutes for securities, interest rates, currencies and commodities and for hedging.”

The LoCorr proposal was submitted a few days after Arrow Funds revealed plans to add investments in bitcoin ETFs to its macro fund that uses research from Dorsey, Wright & Associates (DWA).

The Arrow DWA Tactical: Macro ETF primarily allocates to other ETFs investing in domestic and foreign equity securities of any market capitalization, fixed-income securities of any credit quality, or alternative assets, according to a Feb. 25 filing.

Among other alternative assets, such as commodities and real estate-related securities, the ETF would be able to invest up to 10% in US and Canadian ETFs, trusts and other exchange traded products linked to bitcoin. The fund launched in 2014 and manages about $3 million.

An analysis of existing prospectuses for the LoCorr and Arrow funds make no mention of bitcoin futures or bitcoin ETFs.

Neither fund would directly invest directly in bitcoin. Representatives from both firms could not be immediately reached for comment.

The proposals come as exposure to bitcoin is becoming more prevalent in mutual funds and ETFs.

The WisdomTree Enhanced Commodity Strategy Fund (GCC) became the first ETF to add bitcoin futures in October — just before ProShares and Valkyrie Investments’  launch of ETFs trading bitcoin futures. The WisdomTree Managed Futures Strategy Fund (WTMF) gained the ability on Jan. 1 to allocate up to 5% to bitcoin futures.

BlackRock, Morgan Stanley and Neuberger Berman are among other asset managers that have mutual funds investing in either bitcoin futures, ETFs or the Grayscale Bitcoin Trust (GBTC).

Amplify Investments last month launched its Inflation Fighter ETF (IWIN), which treats bitcoin as a commodity. IWIN’s bitcoin exposure is capped at 20% of net assets and consists of bitcoin futures trading on the Chicago Mercantile Exchange (CME) and up to 15% in GBTC.

“I think this is going to be increasingly common,” Dave Nadig, chief investment officer and director of research of ETF Trends and ETF Database, told Blockworks at the time. “Since the best most traditional finance folks can do with bitcoin is think of it as digital gold, it makes sense to see it as a small allocation in a commodities or inflation strategy.”

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