More Cryptocurrency Funds Are Coming to Market: Portfolio Products

In another twist on the rush to sponsor a cryptocurrency ETF, Alpha Architect has filed an application with the Securities and Exchange Commission to launch an ETF that invests in companies associated with the mining of cryptocurrencies rather than in cryptocurrencies themselves.

The Alpha Architect ETF Trust plans to invest at least 80% of its assets in the equities of  companies “actively involved in the entire spectrum of cryptocurrency mining, from producers of computer chips (foundries), to manufacturers of computer equipment (manufacturers),” to directly investing in market participants creating cryptocurrency themselves (miners), but it will not invest directly in cryptocurrencies. Its subadvisor will screen companies based on environmental, social and governance factors, according to the filing.

Empowered Funds LLC, which does business as Alpha Architect, will be the investment advisor to the fund, and New Gen Minting LLC, known as Viridi Funds, will serve as the subadvisor to the fund. Quasar Distributors LLC will be the distributor.

Brandon Koepke, a computer systems analyst at Alpha Architect, is listed as portfolio manager of the ETF while Wesley Gray, a former assistant professor at Drexel University, is listed as the president and trustee of the trust and CEO of Viridi; John Vogel is treasure of the trust and its chief investment officer.

Alpha Architect has two relatively small ETFs (under $250 million each) — the Alpha Architect U.S. Quantitative Val ETF (QVAL) and the Alph Architect International Quant Val ETF (IVAL).

Morningstar gives both ETFs a negative rating with one star for the domestic version and two stars for the international fund. Its analysis of both funds notes “the questionable investment process and a weak portfolio-management team” though a competitive price compared to peers.

Osprey Funds Adds Osprey Polkadot Trust

Osprey Funds, sponsor of the Osprey Bitcoin Trust (OBTC), has launched the Osprey Polkadot Trust which invests exclusively in DOT, the native token of the Polkadot network. The network is one of a number of competing blockchains, including Ethereum, which aim to grow an ecosystem of cryptocurrencies, and it is one of the newest, introduced last year.

Coinbase, one the largest online platforms for buying, selling and storing digital currencies, will serve as custodian of the trust.

“With limited access points to investing in DOT currently, the Osprey Polkadot Trust will enable accredited investors who want DOT exposure to get titled, auditable ownership through a U.S.-based investment vehicle,” said Greg King, CEO of Osprey, in a statement. He added, “Osprey is just getting started on a series of compelling investment funds that will provide access to some of the most exciting coins and tokens” as the “appetite for next generation investment vehicles” grows.

DOT is the eighth largest cryptocurrency with a market capitalization of over $31 billion, according to Osprey Fund. DOT has a price of just over $36 compared with over $56,000 for BItcoin, which has a market cap over $1 trillion currently,

Ric Edelman’s RIA Digital Assets Council Partners With New York Institute of Finance

The RIA Digital Assets Council, founded by Ric Edelman, has partnered with the New York Institute of Finance for the Council Certificate in Blockchain and Digital Assets Course.

The 11-module online self-study program for financial advisors covers blockchain technology, bitcoin and other digital assets. It aims to make advisors proficient in key practice management areas including tax, regulatory and compliance issues as well as how to add digital assets to client portfolios and explain this new asset class to clients.

“Investors now expect their financial advisors to give them advice about Bitcoin,” said Edelman, who is also founder of Edelman Financial Engines, in a statement. He added that the first class of the certification program “will soon be able to demonstrate their expertise in blockchain and digital assets to their clients.”

The program provides 13 CE credits, and certificants are awarded membership in the Council, granting them exclusive benefits such as member-only educational and networking events, introductions to leaders in the crypto community, direct access to brochures, charts and other content for use with clients. The inaugural class has 500 members, including financial advisors from France, Great Britain, Mexico, Puerto Rico, South Africa, South Korea and Australia.

Schwab Launches International Dividend Equity ETF

Schwab Asset Management has launched the Schwab International Dividend Equity ETF (SCHY), which trades on the NYSE Arca and has an operating expense ratio of 0.14%.

“We are excited to bring our newest ETF to market for investors who are eager for additional choice in investment strategies that seek income,” said David Botset, senior vice president of product strategy for Schwab Asset Management, in a statement.

The Schwab International Dividend Equity ETF seeks to track the total return of the Dow Jones  International Dividend 100 Index and is the 26th ETF managed by Schwab Asset Management.

Nuveen Adds Impact Investing-Focused Closed-End Fund

Nuveen, the global investment manager of TIAA, has introduced the Nuveen Core Plus Impact Fund (NPCT), which is now trading on the New York Stock Exchange (NYSE).

The fund raised $575 million in its common share offering, excluding any exercise of the underwriters’ option to purchase additional shares. If the underwriters exercise that option in full, the fund will have raised approximately $661 million.

The fund seeks to deliver total return through high current income and capital appreciation by investing in a diversified portfolio of fixed-income investments across four social and environmental themes — affordable housing, community and economic development, renewable energy and climate change, and natural resources) or in issuers that demonstrate environmental, social and governance (ESG) leadership.

A portion of the fund’s AUM will be dedicated to impact investing opportunities and a portion will be debt investors in issuers with leading ESG practices relative to industry peers.

Dave Lamb, head of closed-end funds at Nuveen, said the fund “is the  industry’s first responsible investing closed-end fund.”

Another Mutual Fund Plans Conversion to an ETF

Less six weeks after the first U.S. mutual fund converted to an ETF, Adaptive Growth Opportunities Mutual fund expects to do the same.

The  five star $151.5 million Adaptive Growth Opportunities mutual fund (CATEX) is converting  to the Adaptive Growth Opportunities ETF (AGOX) effective May 10.

Nottingham, the administrator of the fund, announced completion of the registration process for its first conversion of an open-end mutual fund to an exchange traded fund (ETF) on Thursday. The fund is part of the Starboard Investment Trust, an affiliate of Nottingham.

“The wealth managers we work with to position our family of funds have been asking for the ETF structure for the past few years, and our plan is to meet their request by converting our other Adaptive portfolios to ETFs in the coming months,” said Adaptive CEO Greg Rutherford in a statement.

Kip Meadows, Founder and CEO of Nottingham, said he believes “there will be a significant number of open-end mutual funds that want to convert to ETFs in the next few years.”

Indeed, Dimensional Fund Advisors has announced plans to convert four of six mutual funds on or around June 11. Guinness Atkinson Asset Management converted two mutual funds to ETFs  in late March.

MSCI Launches Thematic Indexes for Chinese Stocks

Index provider MSCI has launched a suite of thematic indexes for Chinese stocks, which are designed to help investors capitalize on the long-term structural changes in China.

The 20 investable market indexes consist of 10 themes; half are China All Shares indexes: half are China A Onshore China all shares. The themes are disruptive technology, future mobility, robotics, digital economy, autonomous technology & industrial innovation, next generation internet innovation, efficient energy, smart cities, millennials and aging society opportunities.

Other Portfolio News — Capital Group, VanEck, Morningstar

In other portfolio news, Capital Group, parent of American Funds, has filed an application with the SEC to use Fidelity’s active equity ETF methodology for launches of its first actively managed stock and bond ETFs, expected in early 2022.

The ETFs will not disclose their holdings on a daily basis, as traditional ETFs do, but, using the Fidelity methodology, disclose a tracking basket that consists of actual ETF holdings, representative ETFs, and cash and cash equivalents. The percentage of overlaps of the tracking basket overlaps with the actual portfolio holdings will be disclosed daily and actual portfolio holdings will be disclosed monthly basis with a 30-day lag.

VanEck is changing the underlying index for its Van Eck Vectors Low Carbon Energy ETF (SMOG) to enhance the fund’s primary investment strategy and provide more diversified exposure to the evolving, dynamic low carbon energy economy.

SMOG’s underlying index is now the MVIS Global Low Carbon Energy Index, a rules-based index that tracks the performance of globally listed equities involved in the low carbon energy ecosystem. It replaces the Ardour Global IndexSM (Extra Liquid). “The new index modernizes and expands the expected exposure to the low carbon energy ecosystem,” said Ed Lopez, Head of ETF Product with VanEck.

Morningstar has changed the classification for alternative fund categories, creating seven new categories in the process. The new framework breaks larger, sprawling categories into more narrowly defined groups, which allows funds with similar investment strategies and return drivers to be grouped together. As a result, there is less performance dispersion within categories and investors will have a “more meaningful risk and return comparison” among comparable funds. This article explains it all.

European Compliance Association

European Compliance Association

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