Hedge fund titan’s crypto firm sells stake in blockchain ETF

CoinShares International bought the fund from Alan Howard's Elwood as part of its agreement to buy Elwood's indexing business.

Hedge fund titan Alan Howard’s crypto markets business Elwood has sold its economic interest in a blockchain fund with more than $1 billion of assets to CoinShares International Ltd.

The deal is part of CoinShares’ agreement to buy Elwood’s indexing business for $17 million, CoinShares said in a statement Tuesday. The operation of the unit’s blockchain exchange-traded fund, which Elwood launched with Invesco Ltd., won’t be impacted by the sale. Howard is the majority owner of Elwood.

For Elwood, the deal marks a transition away from asset management to focus on its tech platform, which enables institutions such as banks, fintechs, and asset managers to access and trade crypto assets across exchanges and market makers. As part of the agreement, its equity research unit will also join CoinShares and focus on cryptocurrency and blockchain-related stocks.

Elwood helped start the exchange-traded fund in 2019. It invests in companies that are developing blockchain technology, the ledger tool that was first created to facilitate Bitcoin transactions.

Jersey-based CoinShares was one of the first companies to debut a crypto product when it brought a regulated Bitcoin investment vehicle to the market in 2015. At the time Bitcoin, which traded at almost $65,000 earlier this year, was at about $400. The firm’s fortunes have since moved in lockstep with the rise in popularity of cryptocurrencies. In the past year its assets under management have swelled to $3.3 billion from $696 million.

CoinShares has been “trying to model what the industry tomorrow will be,” Chief Executive Jean-Marie Mognetti said in an interview. The blockchain fund was needed to “complement our suite of products.”

While exchange-traded crypto-tracking products exist in Europe and a Bitcoin ETF was set up in February in Canada, U.S. regulators have repeatedly batted away attempts to introduce them, citing concerns about potential manipulation and limited liquidity. To work around regulatory resistance, some firms have been creating so-called Bitcoin-adjacent products that include blockchain funds.

Alan Howard is the billionaire co-founder of Brevan Howard Asset Management, which is starting to invest in cryptocurrencies. Hedge fund titans Paul Tudor Jones and Marc Lasry have also been betting on digital assets.

[More: Ray Dalio considers cryptocurrencies for new funds]