Viridi Funds, a Seattle-based investment advisor focused on the crypto-asset industry, has introduced its inaugural ETF with the launch of the Viridi Cleaner Energy Crypto-Mining & Semiconductor ETF (RIGZ US).
Wes Fulford, CEO of Viridi Funds.
Listed on NYSE Arca, the actively managed fund targets companies within the cryptocurrency mining and infrastructure industries that are committed to environmental sustainability.
Wes Fulford, CEO of Viridi Funds, said: “We launched RIGZ to provide investors with an ETF that attempts to align purpose and profit by investing in the infrastructure that underpins the entire ecosystem with sustainability in mind.
“Miners provide an essential service to cryptocurrency networks, and leading operators are able to generate bitcoin and other cryptocurrencies at a fraction of prevailing market prices. The rationale for owning a mining and infrastructure company is much the same as a senior gold producer – leveraged returns as compared to the underlying commodity. We believe that based on recent developments within the Chinese mining sector, North American miners that have access to sustainable low-cost power, large fleets of new-generation rigs, and access to capital are well-positioned to generate higher returns during the months and years ahead.
“By leveraging the vast operational and capital markets experience of the Viridi team, we believe we can identify attractive mispriced opportunities through our active management strategy, and provide investors with superior returns.”
Investment strategy
The fund will invest in 15 to 30 cryptocurrency miners, manufacturers of cryptocurrency mining hardware, and producers of semiconductors and specialized computer chips used within cryptocurrency mining. Companies will be listed in a developed market and may be of any market capitalization.
While the fund will not invest directly in cryptocurrencies, it will likely have indirect exposure to bitcoin, ethereum, and other cryptocurrencies as many publicly listed miners have these assets on their balance sheets.
When evaluating cryptocurrency miner’s environmental sustainability, Viridi will consider the size of the miner’s operation (in megawatts of energy), the energy mix of the miner’s operation, any purchased carbon offsets, and clean energy commitments expected to be implemented within the next 12 months.
In the absence of clear clean energy disclosures, Viridi will default to an assumption of coal, the worst-rated input on the clean energy scale, and that firm would fail the clean energy screen. Out of an initial universe of 42 miners, half passed the clean energy screen.
The selection of individual securities is driven by a comprehensive evaluation of a company’s current operations and balance sheet. This includes analysis of revenue and margin growth, enterprise value multiples, and proprietary metrics related to the firm’s cryptocurrency-related business line.
For miners, Viridi analyzes the types of crypto mining machines used, price of electricity, quality of data centers utilized, and timing of shipments. Viridi uses its knowledge of hardware markets and supply chains to forecast scheduled deployments and the performance of data mining equipment. Additionally, Viridi will conduct a qualitative analysis of a company’s management team including the degree of previous industry experience, the relationship to suppliers, and the commitment and understanding of the industry.
The fund’s top holdings currently include Marathon Digital (10.5%), Bitfarms (9.6%), Hut 8 Mining (9.2%), Samsung Electronics (8.1%), Nvidia (6.3%), Advanced Micro Devices (4.5%), Hive Blockchain Technologies (4.5%), Taiwan Semiconductor (4.5%), and CleanSpark (4.5%).
It comes with an expense ratio of 0.90%.