Toronto-based Coin Capital Investment Management Inc., the new asset-management division of Coinsquare Ltd., a trading platform for cryptocurrencies, plans to bring its parent firm’s expertise to traditional financial markets with the launch of products catered to financial advisors and their clients.
“We created this asset- management division to offer clients appropriate products [focused on] emerging technologies,” says Lewis Bateman, CEO of Coin Capital. “There really isn’t any technology or emerging technology asset-management firm that’s focused solely on this space.”
Coin Capital, which launched in July, is registered through the Ontario Securities Commission as an exempt-market dealer, investment fund manager and portfolio manager. One of the first orders of business for the new firm is the introduction of ETFs focused on emerging technologies such as blockchain and nanotechnology.
Coin Capital, in partnership with Frankfurt-based Deutsche Börse Group AG’s index provider, STOXX Ltd., developed and launched two indices: iSTOXX developed markets B.R.AI.N index; and iSTOXX Yewno developed markets blockchain index. Coin Capital was set to launch ETFs based on these indices on Sept. 20 on the Toronto Stock Exchange. (Investment Executive went to press on Sept. 17.)
The B.R.AI.N index consists of emerging technologies in biotechnology, robotics, artificial intelligence (AI) and nanotechnology. The index takes a 25% weighting in each of the four industries and selects companies that generate 50% or more of their revenue from their specific industry.
The second index – and the ETF that tracks it – uses AI to select companies with patent-pending and patent-approved blockchain products. Blockchain is a decentralized digital ledger that’s often associated with cryptocurrencies, particularly bitcoin, although it has other transactional and record-keeping applications. By focusing on patents, Bateman argues, the ETF is able to get past the hype of blockchain and find opportunities.
Coin Capital is not alone in introducing a blockchain ETF. Oakville, Ont.-based Harvest Portfolios Group Inc. was the first to market with the launch of Blockchain Technologies ETF in February. That ETF follows the Harvest blockchain technologies index, which consists of companies that are exposed, directly or indirectly, to the development and implementation of blockchain and distributed-ledger technologies.
The Harvest ETF, which currently has about $12 million in assets under management, has been mostly on the decline since its launch. Indeed, Michael Kovacs, chairman and corporate secretary of Harvest, says that much of the initial interest in blockchain has fallen along with the price of bitcoin because the two typically are connected in the minds of investors. Bitcoin has dropped precipitously to about US$6,446 as of Sept. 13, after reaching a high of US$19,343 on Dec. 16, 2017.
Still, Harvest foresees plenty of room for this emerging technology space to grow as investors and advisors become more educated about blockchain and as companies, large and small, develop and grow their own blockchain products and systems.
“We’re fully committed to [this space],” says Kovacs. “We’re very excited about it, but we know it’s going to be rocky.”
Horizons ETFs Management (Canada) Inc. and Evolve Funds Group Inc. (both based in Toronto) also launched blockchain-focused ETFs this year.
Given the wider fascination with technology investments, the interest in more specialized areas of the sector is no surprise, says Dan Hallett, vice president and principal of Oakville, Ont.-based HighView Financial Group.
“We’re in an environment in which innovation and new technologies clearly are in favour from an investment perspective,” Hallett says. “[There] are the well-known names that have been driving stock market returns – not just in the U.S., but globally – in recent years, and I think that does bubble over into more emerging technologies.”
But while Coin Capital focuses on emerging technologies, it still has an eye on the cryptocurrency market. After all, the firm has created two cryptocurrency indices that track the growth of this emerging space. These indices are not available as ETFs, but they could be used by Coin Capital in the future if the firm sees an opportunity in such funds.
In addition, Coin Capital is considering a cryptocurrency fund that will invest directly in cryptocoins. Says Bateman: “We haven’t formalized that yet, but we are looking at it right now and we’re trying to figure out a proper solution for the overall market. We’re working with the regulators, making that sure if we do come up with a solution, it’s an approved solution for the marketplace.”
Much like the blockchain ETFs, similar products are available on the market already: Vancouver-based First Block Capital Inc. launched First Block Capital Bitcoin Trust, an open-ended bitcoin fund available to accredited investors; Toronto-based 3iQ Corp. manages 3iQ Global Cryptoasset Fund; and Montreal-based Rivemont Investments Inc. has launched Rivemont Crypto Fund.