Global X ETFs has launched the Global X Blockchain UCITS ETF, providing exposure to companies globally that are positioned to benefit from the increased adoption of blockchain technology.
Morgane Delledonne, Director of Research, Europe.
Listed on the London Stock Exchange and Deutsche Börse Xetra, the fund has US dollar (BKCH LN), pound sterling (BKCG LN) and euro (BLCH GY) trading lines and is linked to the Solactive Blockchain v2 Index.
The fund provides access to companies that are active in the fields of digital asset mining, blockchain & digital asset transactions, blockchain applications, blockchain & digital asset hardware, and blockchain & digital asset integration.
It is Global X’s eighteenth ETF in Europe having only made its debut this side of the Atlantic in December 2020.
“Blockchain technology’s transparent, verified transactions and immutable recordkeeping offer significant promise, and there is a growing industry of companies contributing to its development,” said Morgane Delledonne, Director of Research, Europe. “Leveraging Global X’s expertise and knowledge of the rapidly evolving blockchain landscape, BKCH will allow European investors to gain exposure to the asset class across a range of different sectors and industries.”
To be eligible for inclusion in the fund’s index, a company must be listed on a recognised exchange and have a market capitalization of at least $200 million, an average daily value traded in the last six months of at least $2m and a free float of at least 10% or a minimum free-float market capitalization of $1 billion. It must also have traded on 90% of the eligible trading days for the six months preceding the selection day.
IPOs are eligible for fast-track admission.
Security selection is determined according to a screening of publicly available information including financial news, business profiles, and company publications using a proprietary natural language processing algorithm developed by Solactive.
The algorithm looks for companies that have or are expected to have significant exposure to the provision of products and/or services that contribute to blockchain technologies and digital assets.
Companies are identified and ranked based on the frequency with which they are referenced in relation to specific keywords associated with blockchain and digital assets.
It looks for companies that are involved in the verification of transactions to a blockchain ledger or that produce technology used in digital asset mining; companies that operate digital asset trading platforms, custodians, wallets, or payment gateways; companies that are involved in the development and distribution of applications and software services related to blockchain and digital asset technology, including smart contracts; companies that manufacture and distribute infrastructure and/or hardware used in blockchain and digital asset activities; and companies that provide engineering and consulting services for the adoption and utilization of blockchain and digital asset technologies.
Each eligible company is then classified as either pure-play (at least 50% of revenues from blockchain activities), pre-revenue (primary business operations in blockchain technology but not currently generating revenues) or diversified (revenues from blockchain activities but less than 50%), according to the extent to which it generates revenues from blockchain activities.
All pure-play companies are included in the index, up to a limit of 40 components.
If there are fewer than 25 index components after all pure-plays have been included, pre-revenue companies are included until the index reaches 25 index components. If there are fewer than 25 index components after all pre-revenue companies have been included, diversified companies are included until the index reaches 25 index components.
If fewer than 25 companies are identified that satisfy the criteria, all eligible companies are selected and the index consists of fewer than 25 index components.
Pure-play companies are weighted according to free-float market capitalization subject to a maximum weight of 12% and a minimum weight of 0.3% with the aggregate weight of components weighted above 4.5% capped at 45%.
Pre-revenue and diversified companies are capped at 2% and the aggregate weight of pre-revenue and diversified companies cannot exceed 10% of the index.
Alongside this, the aggregate weight of Russian stocks may not exceed 15% and stocks listed in India are excluded entirely.
Any excess weight that results from implementing these constraints is redistributed proportionally in an iterative manner such that none of the constraints is breached. And in order to avoid excess turnover, various buffer rules apply.
There are currently 25 holdings with notable positions including Coinbase (13.6%), Riot Blockchain (10.9%), Marathon Digital (9.4%) Northern Data (7.3%) and Voyager Digital (6.4%).
The fund comes with a management fee of 0.50% and joins a growing line-up of ETFs listed in Europe that offer exposure to blockchain-related companies.
Existing UCITS plays include the Invesco CoinShares Global Blockchain UCITS ETF (BCHN LN), the First Trust Indxx Innovative Transaction & Process UCITS ETF (LEGR LN), the VanEck Vectors Digital Assets Equity UCITS ETF (DAPP LN), the ETC Group Digital Assets & Blockchain Equity UCITS ETF (KOIN LN) and the Melanion BTC Equities Universe UCITS ETF (BTC FP).