Purpose rolls out three innovative crypto ETFs

Nov 30th, 2021 | By | Category: Alternatives / Multi-Asset

Purpose Investments has expanded its digital assets suite in Canada with the launch of the world’s first actively managed and options-enhanced cryptocurrency ETFs.

Som Seif, CEO of Purpose Investments.

Som Seif, Founder and CEO at Purpose Investments.

The Purpose Bitcoin Yield ETF (BTCY.B CN) and Purpose Ether Yield ETF (ETHY.B CN) have been listed on the Toronto Stock Exchange in Canadian dollars.

Each ETF comes with a management fee of 1.10%.

The Purpose Crypto Opportunities ETF, meanwhile, has also been listed on TSX and is available in CAD-hedged (CRYP CN), CAD unhedged (CRYP.B CN), and USD (CRYP.U CN) share classes.

The ETF’s management fee is 1.25%.

The recent listings follow Purpose Investment’s debut of the “physically” backed Purpose Bitcoin ETF and Purpose Ether ETF, the first bitcoin and ether ETFs to list in any major developed market, earlier this year.

Som Seif, Founder and CEO at Purpose Investments, said: “We’re very excited to once again be a global leader in delivering high-quality new crypto solutions to investors by launching three new actively managed and option strategy cryptocurrency ETFs.

“With these ETFs, we aim to expand the ways investors can access crypto markets and generate the unique returns available in this emerging asset class. These products will complement our existing bitcoin and ether ETFs and provide a different form of return-and-risk profiles for investors.”

Crypto Yield ETFs

The Purpose Bitcoin Yield ETF and Purpose Ether Yield ETF provide direct exposure to bitcoin and ether, respectively, by investing in the Purpose Bitcoin ETF and Purpose Ether ETF.

The funds may also allocate up to 50% of their assets to an actively managed derivatives sleeve which has the aim of generating income through two options-based strategies: covered calls and cash-covered puts.

A covered call involves holding a long position in an asset (in this case the Purpose Bitcoin ETF or Purpose Ether ETF) and selling at-the-money or out-of-the-money call options on that same asset to generate income from the option premium.

Covered call strategies generally outperform their underlying asset during bear markets, range-bound markets, and modest bull markets; however, during strong bull markets, when the underlying asset may rise significantly above the call option’s strike price, covered call strategies are expected to lag.

A cash-covered put, meanwhile, involves selling at-the-money or out-of-the-money put options while simultaneously setting aside the capital needed to purchase the underlying asset at the option strike price.

Cash-covered puts are typically implemented by investors who are slightly bearish on the underlying asset in the short-term but bullish in the long-term. The goal is for the asset to be just below the put option strike price at expiration. A successful cash-covered put results in the investor receiving the premium from the put option and buying the underlying asset near the strike price.

If the asset descends considerably below the strike price, the premium received from selling the put option provides somewhat of a cushion. If, however, the asset appreciates significantly without first falling below the strike price, the investor still receives the option premium but may have missed out on the asset’s gain.

Crypto Opportunities

The Purpose Crypto Opportunities ETF is sub-advised by the Canadian division of Neuberger Berman, a private investment manager with more than $450 billion in assets.

The fund seeks long-term capital appreciation by investing in digital assets and crypto derivatives, as well as the equities of companies supporting the crypto economy (up to 15% of portfolio assets).

The fund’s digital assets exposure will typically consist of investing in Purpose’s bitcoin and ether ETFs as well as in futures contracts linked to these cryptocurrencies. Neuberger Berman will seek to exploit the term structure of each cryptocurrency’s futures curve.

The fund may also deploy covered call and cash-covered put strategies as described above.

Tags: , , , , , , ,

Leave a Comment