Blockchain could be the world’s next internet bubble. However, top companies in the category are seeing a lot of fundamental business management skepticism and few have reported any considerable profits. For investors, this makes investing in an index or managed fund much more attractive than trying to pick individual holdings. ETFdb.com cites only five blockchain exchange-traded funds and the mutual fund industry has yet to introduce any funds, but is entertaining the idea of using blockchain in investment operations.
Below is a breakdown of the five blockchain ETFs currently available for investors who want to capitalize on blockchain’s opportunities with a diversified fund to manage some of the risks.
Amplify Transformational Data Sharing ETF (BLOK, Financial)
BLOK is an actively managed ETF that invests 80% of the fund’s assets in companies that develop and utilize blockchain technology. The fund was launched in January. It has a relatively low market entry price at $20.68. It also has a low net expense ratio of 0.70%.
The majority of the fund’s holdings are in the internet sector at 31.4%, followed by semiconductors at 16%. Across geographies, 57% of the holdings are in North America. While the majority of the fund’s holdings are in North America, as of June, its three top holdings are from Asia and include Digital Garage (TSE:4819), GMO Internet (TSE:9449) and Taiwan Semiconductor (TSM).
The fund has only a short track record of a few months. In the month of May, it generated a 5.22% return. Since its inception, it has a return of 0.70%.
Reality Shares Nasdaq NexGen Economy ETF (BLCN, Financial)
BLCN is a passive index that seeks to track the performance of the Reality Shares Nasdaq Blockchain Economy Index. The Index is managed by Reality Shares and Nasdaq with Reality Shares also serving as the issuer of the fund. The Index uses a smart beta strategy to give securities a blockchain score. The index is based on a universe that includes all blockchain companies, but only companies with a blockchain score of 50 or greater are included in the index. Index rebalancing occurs twice a year, which helps to keep BLCN’s gross expense ratio low at 0.68%.
BLCN also has a short track record with inception of January 2017. The fund’s return since inception is -5.80%. Top holdings in the fund include Intel (INTC), Digital Garage, Advanced Micro Devices (AMD) and Microsoft (MSFT).
First Trust Indxx Innovative Transaction & Process ETF (LEGR, Financial)
LEGR was launched in January by First Trust. LEGR is also a passive blockchain index fund. It seeks to replicate the returns of the Indxx Blockchain Index, which was created by Indxx. The index uses a smart beta methodology that screens a universe of companies with a significant association to blockchain business. The index uses a three-tiered scoring system based on research which categorizes the companies. Companies falling in the top tiers – active enablers and active users – are included in the index. Indxx reconstitutes and rebalances the index twice a year in March and September.
LEGR has a market price of $30.04. Its return since inception is -3.59%. It has an expense ratio of 0.65%. Top holdings in the Fund include Advanced Micro Devices, Intel and Alibaba (BABA).
Innovation Shares NextGen Protocol ETF (KOIN, Financial)
KOIN was launched in January. It is a passive, smart beta index ETF that replicates the Innovation Labs Blockchain Innovators Index. The index rebalances quarterly with semi-annual review. The Index methodology uses artificial intelligence analysis to identify the best companies in four blockchain categories: cryptocurrency, mining enablers, solutions providers and adopters.
It has a market price of $25.46. Its net expense ratio is 0.65%. Since its inception, the fund has returned -0.64%.
BKC is an actively managed ETF issued by REX and managed by Brian Kelly. The fund was recently launched in May. The fund’s investment universe includes companies with substantial business in cryptocurrency and blockchain technology.
The fund has no reported performance with an inception date of May 16, 2018. As of its launch, it had 32 holdings with top holdings in Taiwan Semiconductors, Global Unichip (TPE:3443), GMO Internet (TSE:9449), Overstock.com (OSTK), SVB Financial (SIVB) and Square (SQ).
The fund has a low market price of $25.50. It also has a relatively low expense ratio of 0.88%.
Disclosure: I own BLOK and BLCN.
