By Mark DeCambre
Now you can add Invesco , one of the biggest operators of exchange-traded funds in the U.S., to the list of new providers. The fund provider joined with Galaxy Digital Holdings Ltd /zigman2/quotes/205842391/delayed BRPHF +7.15% /zigman2/quotes/201509411/delayed CA:GLXY +7.69% and Alerian S-Network to launch a pair of passively managed crypto and blockchain related ETFs, which could be a prelude to a suite of digital-asset investment funds.
The Invesco Alerian Galaxy Crypto Economy ETF /zigman2/quotes/230087819/composite SATO +4.57% and Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF /zigman2/quotes/230087835/composite BLKC -1.55% were trading in positive territory in their Thursday debuts.
John Hoffman , head of Americas, ETFs and indexed strategies at Invesco /zigman2/quotes/200294387/composite IVZ +0.62% , was quoted by The Wall Street Journal as saying that the partnership with Galaxy was about “defining the new market.”
“It’s not just about getting the first bitcoin ETF to the market,” Hoffman said. “This is about expanding the horizon. We ultimately think we can define this new market.”
A number of fund providers and investors are still laboring to get a U.S.-listed ETF backed directly by bitcoin approved by regulator the Securities and Exchange Commission but have so far failed.
The Invesco ETFs aren’t pure plays into crypto but invest in companies and industries related to the nascent blockchain and digital-asset sector. Invesco Alerian Galaxy Crypto Economy ETF’s largest holding is BIGG Digital Assets Inc. /zigman2/quotes/202551010/delayed BBKCF +2.32% , which develops software to track and trace crypto transactions. Northern Data AG /zigman2/quotes/205068705/delayed XE:NB2 +4.65% , which provides infrastructure for high-performance computing, is the second-largest holding for fund. Northern Data’s infrastructure is used in bitcoin mining, blockchain, artificial intelligence, among other areas. Bit Digital Inc. /zigman2/quotes/203221927/composite BTBT +5.60% , Square Inc. /zigman2/quotes/205989440/composite SQ +3.69% and MicroStrategy /zigman2/quotes/202561856/composite MSTR +3.85% round out the fund’s to p 5 holdings .
Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF is made up of a similar mix of companies but in different proportions . A little over 50% of the Blockchain ETF’s holdings are information tech, compared with 63% for the crypto fund.
Both funds carry expense ratios of 0.60%, which is cheaper than competitor funds Bitwise Crypto Industry Innovators ETF /zigman2/quotes/226726487/composite BITQ +4.26% , with a 0.85% fee and Amplify Transformational Data Sharing ETF /zigman2/quotes/204122720/composite BLOK +2.84% , which is 0.71%. However, it costs more than the VanEck Digital Transformational ETF and Global X Blockchain ETF, which both have expense ratios of 0.50%.
CFRA’s Rosenbluth, head of ETF & mutual fund research, said that there is a simple reason why we are seeing more crypto funds emerge that are indirect plays on digital assets.
“There’s a long term shift toward the trend but there is less clarity who the big winners will be,” Rosenbluth told ETF Wrap via email.
“An ETF provides investors with the benefits of diversification relative to single stock ownership. In addition, the lack of a bitcoin ETF, whether of physical or futures based has made these thematic equity ETFs appealing,” the researcher said.
How to ride shipping
As supply chain issues remain in focus, forcing companies and individuals to pay more for goods, there may be another way to play rising inflation.
Shipping has become a flashpoint for investors as pricing pressures grow and backlogs increase. The Wall Street Journal reported that the cost of shipping containers across the ocean is surging and it continues to be a challenge to find long haul truck drivers. Those shortages have combined with surging energy costs and investors have apparently started to focus on at least one fund.
Breakwave Dry Bulk Shipping ET /zigman2/quotes/210103444/composite BDRY +9.49% is up 400% on the year and 8% already in October, FactSet data show. The fund offers exposure to freight futures and to a key cog in the wheel of the global economy: shipping. It is tiny at about $112 million under management and carries an pricey expense ratio at 3.76%. An even smaller fund, SonicShares Global Shipping ETF /zigman2/quotes/228531664/composite BOAT +0.43% , which was kicked off in August and has $11 million under management, also attempts to provide “pure-play exposure to the water transportation industry” and looks for globally listed companies “that derive significant revenue from cargo shipping, dry-bulk shipping, and oil and natural gas transport.”
The Sonic ETF is down 2% over the past 30 days while Breakwave is up 44% over the past monthly period.
No more ‘Vol-mageddons’?
Reports indicate that SEC Chair Gary Gensler is reviewing potential risks associated with complex, leveraged ETPs, which could have “systemwide” consequences for financial markets.
The SEC is considering potential rule changes to provide better protections for prospective investors in leveraged and inverse ETFs.
It is curious then that the SEC approved a pair of ETFs that mimic the VelocityShares Daily Inverse VIX Short-Term ETN and the VelocityShares Daily 2X VIX Short-Term ETN, which infamously imploded back in early February of 2018 after a period of quiescence in the market, with Cboe Volatility Index /zigman2/quotes/210598281/delayed VIX -6.29% at or near record lows, busted out.
This time the new funds are structured as ETFs rather than exchange-traded notes, which is essentially a unsecured debt instrument issued usually by a bank, a fact that many investors weren’t entirely aware of back four years ago.
Good ETF reads
ETF Veterans from BlackRock, SSGA, and JPMorgan bet on changing bond markets (Institutional Investor)
Which ETFs saw the biggest outflows in Q3? (ETF Stream)