Vanguard’s $600 million ‘investment’ in bitcoin miners isn’t what you think

Vanguard’s ownership of more than half a billion dollars’ worth of stock in bitcoin miners may not mean what you think.

The fund group, which had $7.7 trillion in assets under management as of April 30, now owns roughly 17.9 million shares of Riot Platforms stock, a Monday SEC disclosure indicated.

Vanguard also owns 17.5 million of Marathon Digital, according to a separate filing.

The positions — dated as of June 30 — amount to 10.24% and 10.31% of all issued Riot and Marathon common stock, respectively.

These shares had a combined value of more than $600 million on Wednesday afternoon.

Various media outlet headlines and Twitter posts seem to liken Vanguard’s positions in the bitcoin miners to some sort of direct stake in the companies.

Aniket Ullal, head of ETF research at CFRA Research, said it would be incorrect to equate the large holdings in individual companies to strategic investments made by private equity or venture capital firms. 

“I can’t speak to Vanguard’s motivation for its investment in Riot, but their position was procured in the market and not by way of any company-facilitated offering,” Riot CEO Jason Les told Blockworks.

Marathon did not immediately return a request for comment.    

Ownership via Index funds 

Some may see Vanguard’s 10%-plus ownership in Riot and Marathon as being bullish on such firms, or the crypto space more broadly — though the company has previously made clear its hesitancy to enter the space.

Ullal noted that fund managers typically invest in publicly listed companies as part of an index-tracking mandate.

“The vast majority of equities managed by Vanguard are in index funds, which do not take a view on any specific stock,” a Vanguard spokesperson told Blockworks in an email. “Rather they simply seek to track the performance of the fund’s target benchmark.”

The representative declined to comment on Riot and Marathon specifically. 

Indeed, several Vanguard index funds own Riot Platforms and Marathon.

Of the top 10 mutual funds with the highest ownership of Riot Platforms, as of December 2022, Vanguard ran five of them, according to Yahoo Finance data. 

The Vanguard Total Stock Market Index Fund (VTSAX) and the Vanguard Small-Cap Index Fund (VSMAX) ranked highest, with about 4.6 million and 3.9 million shares of Riot in the funds’ admiral share class, respectively.

VTSAX also held 3.3 million shares of Marathon Digital at the end of December 2022, while VSMAX held nearly 2.9 million Marathon shares at that point. 

The primary drivers of trading by index funds are investor cash flows into or out of the fund, corporate actions — such as mergers and acquisitions or secondary offerings — and index rebalances or changes.

Fund managers gain shareholder voting rights for the firms they invest in, Ullal said — adding that BlackRock and Vanguard have started proxy voting programs in which unitholders in their funds can vote on issues raised at company shareholder meetings.

While financial giants such as BlackRock and Fidelity have expressed interest in wading deeper into the crypto space, Vanguard has not expressed any plans to do so. 

Chief Investment Officer Greg Davis called crypto “more of a speculative asset class” in May 2022. He added that while the firm finds blockchain technology compelling, crypto “doesn’t fit from an investment perspective.”     

Vanguard declined to comment further. 

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