Bitwise launches two new funds to capitalize on dip in cryptocurrency market

Funds are built for professional investors sick of waiting for SEC to approve a bitcoin ETF

Dec 5, 2018 @ 3:49 pm

By Ryan W. Neal

The downturn in U.S. stocks is nothing compared to the sell-off cryptocurrency traders are experiencing. Bitcoin plunged 5.2% Tuesday to $3,700, the lowest it's been since November 2017, according to MarketWatch. Ether, one of bitcoin's largest competitors, dropped even further.

At least one crypto-entrepreneur sees the dip as the perfect time to introduce new investment products for professional investors to get into the market. Bitwise Asset Management, a startup that recently earned the backing of Ric Edelman, announced Wednesday the launch of low-cost, liquid beta funds exclusively holding bitcoin and ether.

The funds, Bitwise Bitcoin Fund and Bitwise Ethereum Fund, are only available to U.S.-accredited investors. The Securities and Exchange Commission has not yet approved the trading of cryptocurrency index funds for retail investors.

The funds are available in two share classes. Institutional shares have an all-in expense ratio of 1% and a minimum investment of $1 million. Investor shares carry a 1.5% expense ratio and a $25,000 minimum.

Matt Hougan, Bitwise CEO and global head of research, said demand for these products is driven by clients — financial advisers and institutional investors — who are sick of waiting for the SEC to approve a bitcoin ETF, but want an investment vehicle more in line with what they are used to.

(More: Bitcoin ETFs stymied by lack of safeguards, says SEC chief Jay Clayton)

Many existing options carry premiums, charge exit fees, have lockups and charge expenses outside of the management fee, he said.

"[Our funds] are more similar to a traditional mutual fund," Mr. Hougan told InvestmentNews. "There's a class in institutional investors and accredited investors who want access to [cryptocurrencies] and are frustrated waiting for it to be approved. This is a way they are comfortable with."

Though the bitcoin market has tumbled an estimated 68%, Mr. Hougan is confident a number of developments, including the launch of Fidelity Digital Asset Services, indicate a rebound is on the horizon.

"We have seen significant inbound demand for high-quality bitcoin and ether funds," Mr. Hougan said in a statement. "Our clients have been adding to their positions throughout the downturn, and many who've been following the space for a while are using this opportunity to finally come in."

There is also widespread frustration in the performance of many of the more popular alternative asset classes like hedge funds, private equity and venture capital, Mr. Hougan said. With equity markets sliding, investors are looking for other options and "turning to things like crypto as an alternative to the alternatives they've soured on."

"We have a number of financial advisers who are clients and a number of financial advisers who direct clients to us," Mr. Hougan added. "We do a huge amount of education with advisers so they can answer the questions that clients have."

Matthew Ricks, a financial adviser with Ameriprise Financial, said his younger clients have remained interested in cryptocurrencies despite the latest downturns. Some are looking to buy more in anticipation of a rebound, while others are taking a long-term bet on the technology's future benefits. But most haven't yet bought in.

(More:Sell-off in cryptocurrencies reaches new low)

"They kept looking for an opening and figured the massive decline might be the time," Mr. Ricks said.

The complexity of investing in crypto excluded some of his clients, and products like Bitwise's funds could be attractive to them.

"That being said, I doubt this product would become available at most of the wirehouses and broker-dealers any time soon," he said.

The funds are the second and third products from Bitwise, joining the Bitwise 10 Private Index Fund, which invests across the 10 most popular cryptocurrencies.

0
Comments

What do you think?

View comments

Upcoming event

Jul 09

Conference

Boston Women Adviser Summit

The InvestmentNews Women Adviser Summit, a one-day workshop now held in six cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more

Most watched

INTV

Young advisers envision a radically different business in five years

Fintech and sustainable investing are two factors being watched closely by some of the 2019 class of InvestmentNews' 40 Under 40.

INTV

Young professionals see lots of opportunity to reinvent the advice experience

Members of the 2019 InvestmentNews class of 40 Under 40 have strategies to overcome the challenges of being young in a mature industry.

Latest news & opinion

Target-date fund design may be wrong for retirees

Researchers suggest the funds don't adequately hedge against sequence-of-returns risk in retirement.

InvestmentNews' 2019 class of 40 Under 40

Our 40 Under 40 project, now in its sixth year, highlights young talent in the financial advice industry. These individuals illustrate the tremendous potential of those coming up in the profession. These stories will surprise, entertain, educate and inspire.

New Jersey fiduciary rule: Pressure leads to public hearing, comment deadline extension

Industry push results in chance to air grievances on July 17 and another month to present objections.

Galvin to propose fiduciary rule for Massachusetts brokers

The secretary of the commonwealth is proposing a fiduciary standard in response to an SEC investment-advice rule he views as too weak.

Summer reading recommendations from financial advisers

Here are some books that will keep you informed and entertained during summer's downtime

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print