While the arrival of a Bitcoin exchange-traded-fund (ETF) seems to be a distant dream currently, a newly proposed ETF product by Blockforce Capital plans partial exposure to Bitcoin Futures along with other traditional investments like sovereign debts, bonds, etc.
On Monday, February 11, Reality Shares ETF Trust, a division of Blockforce Capital submitted its filing to the U.S. Securities and Exchange Commission (SEC). Dubbed as the “Reality Shares Blockforce Global Currency Strategy ETF”, it will be actively managed fund listed on NYSE Arca Exchange.
Details of the Reality Shares ETF Fund
The SEC filing reads that ETF fund is “designed to provide investment exposure to global currencies, both fiat and virtual currencies that have been widely adopted for use (e.g., as store-of-value, international remittance, foreign-exchange trading) throughout the world.”
Furthermore, it also notes that the ETF investment will comprise a portfolio of “high-quality, short-term (no greater than 18-month maturity), sovereign debt instruments” that are listed on the U.S. Exchanges.
In regards to the investment in Bitcoin Futures, the fund prefers cash-settled futures contracts over the physically settled. Meaning, upon expiry, the investors of the ETF fund will get the cash equivalent instead of actual Bitcoins. Thus, the firm plans investments in Bitcoin Futures traded on Chicago Mercantile Exchange (CME) and Cboe Futures Exchange LLC, the two companies to offer the first Bitcoin futures contracts in December 2017.
Investing in Bitcoin Futures Through a Registered Subsidiary
Note that the ETF fund won’t invest directly into Bitcoin. The filing notes:
“The Fund may gain most of its exposure to Bitcoin Futures through its investment in the Subsidiary [Cayman Islands], which invests in Bitcoin Futures. To the extent the Fund invests in such instruments directly, it will seek to restrict its income from such instruments to a maximum of 10 percent of its gross income [...] to comply with certain qualifying income tests necessary for the Fund to qualify as a regulated investment company.”
The fund’s portfolio division as explained in the filing is as below:
“The Adviser initially constructs the Fund’s portfolio by investing approximately (i) an equal-weight of 15 [percent] of the Fund’s net assets in Fixed Income Securities denominated in each Fiat Significant Global Currency; (ii) 15 [percent] of the Fund’s net assets representing notional exposure in Bitcoin Futures and (iii) 10 [percent] of the Fund’s net assets in Money Market Instruments for margin and/or cash management purposes, each as measured at the time of purchase (the ‘Target Portfolio’).”
Reality Shares already holds two blockchain ETFs listed in partnership with Nasdaq. The Reality Shares Nasdaq Blockchain China Index (BCNA) and the Reality Shares Nasdaq Nexgen Economy ETF (BLCN).