BlackRock has launched a new thematic equity ETF in Europe providing exposure to companies involved in the development, innovation, and utilization of blockchain technologies.
The blockchain is a decentralized, distributed ledger that securely records digital transactions.
The iShares Blockchain Technology UCITS ETF (BLKC) has been listed on Euronext Amsterdam in US dollars.
The blockchain, a decentralized, distributed ledger that securely records digital transactions, is expected to be one of the most disruptive innovations in recent history due to its potential to impact business models across virtually all segments of the economy.
According to an analysis by Markets and Markets, the blockchain industry is expected to grow from $4.9 billion at the end of 2021 to $67.4bn by 2026, representing a compound annual growth rate of 68.4%.
Omar Moufti, product strategist for thematic and sector ETFs at BlackRock, said: ‘We believe blockchain technology is going to become increasingly relevant for our clients as use cases develop in scope, scale, and complexity. The continued proliferation of blockchain technology underscores its potential across many industries.’
Methodology
The ETF is linked to the NYSE FactSet Global Blockchain Technologies Index which selects its constituents from a universe of developed and emerging market stocks with market capitalizations above $100 million and average daily trading volumes greater than $1m.
The methodology harnesses FactSet’s Revere Business Industry Classification System (RBICS) to screen for companies operating in industries related to the blockchain & crypto ecosystems. Securities identified through this step are then assigned to one of two Tiers:
Tier 1 consists of companies deriving at least 50% of their revenue from developing blockchain technologies, mining digital assets, or providing cryptocurrency trading and exchange services.
Tier 2, meanwhile, comprises ancillary businesses that derive less than 50% of their revenue from these activities, as well as developers and manufacturers of semiconductor chips used for crypto mining.
The index targets a minimum of 35 constituents, selecting all Tier 1 securities and at least ten Tier 2 securities according to float-adjusted market capitalization.
Constituents are weighted by float-adjusted market capitalization while setting a floor of 75% for the aggregate weight of Tier 1 securities. Tier 1 securities are capped at 12% and the combined weight of stocks above 4.5% is limited to 45%. Tier 2 securities are capped at 4%.
As of the end of September, stocks from the US accounted for three-quarters (75.4%) of the index weight with the next-largest country exposures being China (6.7%) and Canada (5.9%).
Information technology stocks dominated, making up three-quarters (75.5%) of the total allocation with the majority of the remaining weight dedicated to financials at 20.1%.
Notable positions included Coinbase (12.7%), Marathon Digital (11.4%), Block (11.3%), Riot Blockchain (10.6%), Canaan (4.8%), and PayPal (4.3%).
The ETF comes with an expense ratio of 0.50%, slightly higher than the recently launched WisdomTree Blockchain UCITS ETF (WBLK LN) which costs 0.45%, although both funds are some way cheaper than Europe’s largest blockchain thematic ETF, the $500m Invesco CoinShares Global Blockchain UCITS ETF (BCHN LN), which is priced at 0.65%.