Digital asset manager Grayscale Investments has launched its first ETF, a global thematic equity fund targeting companies driving growth within the crypto economy.
Michael Sonnenshein, CEO of Grayscale Investments.
The Grayscale Future of Finance ETF (GFOF US) has been listed on NYSE Arca with an expense ratio of 0.70%.
The fund is linked to the Bloomberg Grayscale Future of Finance Index which harnesses Bloomberg’s thematic basket approach, searching beyond traditional industry divisions in order to identify companies relevant to the underlying theme.
The ‘Future of Finance’ theme is defined as the intersection of finance, technology, and digital assets. It encompasses companies that are best-positioned to contribute significantly to the growth of the digital asset ecosystem over the next two years.
The theme categorizes eligible companies under three key pillars: financial foundations (buyers, sellers, and other transactors in digital assets including asset managers, exchanges, brokerages, and wealth managers); technology solutions (companies developing financial applications utilizing blockchain technology); and digital asset infrastructure (miners, hardware providers, and energy managers).
A list of potential constituents is first drawn up by harnessing the insights of Bloomberg Intelligence analysts in combination with Bloomberg’s natural language processing tool that scours company documents for keywords related to the underlying theme.
Using a combination of data analytics and analyst expertise, each potential company is then assigned three scores: a Revenue Score, which measures a firm’s potential revenue exposure to the theme over the next two years; a Theme Score, which measures a firm’s relative importance to the overall development of the Future of Finance theme; and a Regulatory Score, which measures the company-specific risk associated with the current regulatory landscape and potential changes in regulation. Companies must score at least a 1 (high) or 2 (medium) on each of the three measures to be selected for the index.
Chosen constituents are weighted by market capitalization subject to a cap of 8% on each of the five largest stocks and a cap of 4% on any other company. Reconstitution and rebalancing occur quarterly.
As of the beginning of February, the index contained 22 constituents. Approximately two-thirds (63.1%) of the total weight was allocated to US-listed stocks with the next-largest country exposures being Canada (14.1%), Israel (5.9%), and the UK (4.6%).
Information technology stocks dominated with a combined weight of 58.8% while the remaining allocation (41.2%) was assigned to stocks from the financials sector.
Notable positions included PayPal (9.6%), Coinbase (8.3%), Silvergate Capital (8.0%), Robinhood Markets (7.8%), Block (7.8%), Plus500 (5.9%), and Argo Blockchain (4.6%).
Michael Sonnenshein, CEO of Grayscale Investments, commented: “While Grayscale has established itself as a global leader in digital currency investing, the future of finance demands a much broader mandate. We’re proud to announce our first ETF in partnership with Bloomberg as we undertake this strategic expansion of our business. This product draws upon our historical strengths while kicking off the next stage of our evolution as an asset manager that helps investors build portfolios that can stand the test of time.”
David LaValle, Global Head of ETFs at Grayscale Investments, added: “As we strive to meet investor demand for products that will define the next generation of investment portfolios, we are thrilled to reach this important milestone: a first step in what will be an ongoing strategic expansion of Grayscale’s investment offerings that leverage the ETF wrapper. Through GFOF, investors now have the opportunity to receive exposure to the companies that are pivotal to the evolution of the global financial system.”
Dave Gedeon, Global Head of Multi-Asset Indices at Bloomberg, said: “We are excited to partner with Grayscale as they advance their commitment to innovative, investable products, and we believe Bloomberg has built a best-in-class benchmark for the market. Backed by our proprietary data married with robust research from Bloomberg Intelligence, the Bloomberg Grayscale Future of Finance Index is primed to become the key equity benchmark for our ever-evolving digital economy.”