VanEck unveils digital assets thematic ETF

Apr 16th, 2021 | By | Category: Equities

ETF Strategy events are back! Please join us for breakfast briefings on Digital Assets & the Blockchain Economy on Thursday 2nd September 2021 (08:15-11:00) and Thematic Investing on Friday 3rd September 2021 (08:15-11:15) both at Yauatcha City, Broadgate Circle, London. Sponsors include First Trust, GHCO, MSCI, Rize ETF, VanEck and WisdomTree.


VanEck has launched a new thematic equity ETF providing exposure to companies deriving significant revenue from the digital assets ecosystem.

Ed Lopez, Managing Director, Head of ETF Product for VanEck

Ed Lopez, Managing Director, Head of ETF Product for VanEck.

The VanEck Vectors Digital Transformation ETF (DAPP US) has listed on Nasdaq and comes with an expense ratio of 0.65%.

Distributions are made to investors on an annual basis.

While there are several ETFs focused on the broader blockchain investment theme, DAPP is understood to be the first to target companies involved in digital asset projects.

This includes firms involved in digital asset mining, hardware, exchanges, holding and trading, payment gateways, patents and services, and banking.

The fund does not invest in actual digital assets, such as bitcoin, either directly or indirectly.

Structural growth

The opportunity set of publicly traded, pure-play companies linked to the digital assets ecosystem is still small but has grown in both size and revenues over the last few years.

According to VanEck, revenue generated by the companies included in the ETF’s index accelerated rapidly in 2020 to surpass $10 billion, up from approximately $6bn and $5bn in the previous two years (see chart below).

And despite underlying volatility in digital assets themselves, many publicly traded companies are investing heavily in new business lines to position themselves favourably as adoption continues to accelerate.

Ed Lopez, Managing Director, Head of ETF Product for VanEck, said: “The digitalization of the global economy has been picking up steam for the past several years, and as digital assets mature, this has driven the growth of several innovative companies. To this point, however, investors have had to choose among funds that too often included companies only tangentially involved with digital assets. That is something we’ve sought to solve with the launch of DAPP, a fund we’re very excited to be bringing to market.

“Digital transformation companies cover a broad swath of the investment landscape related to digital assets, well beyond what’s taking place with cryptocurrencies like bitcoin. It’s also important to note that digital transformation represents a long-term structural growth story, supported by significant ongoing investment and adoption on a global scale by both retail and institutional investment participants. We as a firm have long believed in the utility and viability of digital assets as an asset class, and we are thrilled to be providing investors with exposure to companies powering the digital transformation.”

Index methodology

The fund is linked to the proprietary MVIS Global Digital Assets Equity Index which selects its constituents from a universe of developed and emerging market companies with market capitalizations greater than $150 million and average daily trading volume above $1m.

To be eligible for inclusion, a company must generate at least 50% of its revenue from digital asset projects or have at least 50% of its assets invested in digital asset projects or direct digital asset holdings.

To capture non-established but upcoming companies, the methodology also includes firms that are likely to generate at least half of their revenue from digital asset projects once their current projects under development are completed.

The index targets at least 25 constituents; however, due to the lack of pure-play companies in the global digital assets segment, semiconductor and online money transfer companies may be added to the index to reach this minimum component number.

Constituents are weighted by float-adjusted market capitalization subject to a cap of 8% on any single stock. The index rebalances on a quarterly basis.

Stocks from the US presently make up nearly one-third (63.0%) of the total index allocation with the remaining weight distributed across stocks from China (11.9%), Canada (11.9%), Germany (5.8%), Taiwan (4.6%), and the UK (2.8%).

Perhaps unsurprisingly, information technology stocks dominate with a combined weight of 78.2% with the majority of the remainder of the portfolio allocated to companies in the financials sector at 19.3%.

The index has a strong mid-cap leaning with these companies accounting for over half (53.4%) of the index by weight, while a third (30.0%) is allocated to large-caps and the remainder (16.6%) to small-caps. Notable positions include Square (9.2%), Galaxy Digital (7.8%), Voyager Digital (7.2%), Marathon Digital (7.1%), and Silvergate Capital (6.8%).

VanEck digital transformation ETF

Source: VanEck.

(All index data as of 15 April 2021)

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