Invesco has launched a blockchain exchange-traded fund (ETF) on the London Stock Exchange on March 11. The ETF is “a fresh sign of the growing interest among asset managers in the technology that underpins cryptocurrencies,” a Financial Times article pointed out.
Invesco, a US-based investment management company has partnered with London-based Elwood Asset Management, an investment firm to launch the “Invesco Elwood Global Blockchain UCITS ETF.” The Invesco Elwood Global Blockchain ETF will invest in companies such as Taiwan Semiconductor Manufacturing and CME Group. The ETF carries a management fee of 0.65 percent annually.
The news was revealed by Elmwood Asset Management in a press release in which, Bin Ren, CEO of Elmwood explained the rationale behind the ETF: “Blockchain has been around for a decade, but many people still see it just as the technology behind cryptocurrencies. The true potential, however, may extend far beyond that. We are beginning to see the technology being used by financial services companies in particular, but we expect greater application of blockchain technology across a wide range of industries. We believe the potential for blockchain to change the global economy is greatly underappreciated in today’s market, much like the internet was in the beginning, when most people couldn’t see past its usefulness for email.”
Chris Mellor, Head of EMEA ETF Equity Product Management at Invesco, said, “The potential for blockchain to drive real earnings is huge, but it is often hidden within companies involved in other areas. This ETF offers investors access to companies with real earnings now, but with the added potential of blockchain-related earnings not reflected in their share prices.”
An ETF or exchange-traded fund is a “marketable security” (liquid financial instrument that can be easily converted into cash), which tracks a stock index, commodity, bonds or basket of assets. When it comes to blockchain ETFs, these are funds that have at least two characteristics. First, they are funds that can invest in companies dealing with the transformation of business applications through development and use of the blockchain, and secondly, can track the performance of cryptos through futures contracts or by holding the underlying crypto assets.
According to the Financial Times, the Invesco Elwood Global Blockchain UCITS ETF will first invest in a portfolio of 48 companies based on a “proprietary scoring system developed by Elmwood Asset Management.”
Kevin Beardsley, Head of Business Development at Elwood, said: “The majority of the index is currently allocated to companies where the value attributable specifically to blockchain technology is either in the ‘developing’ or ‘potential’ phase. These are companies with assets that are well-positioned to capitalize on the emerging opportunities for blockchain. Over time, however, we would expect the balance to shift naturally to companies with more significant direct exposure to blockchain-related earnings as the technology becomes more ubiquitous.”
The Financial Times mentioned other similar ventures, referring to seven blockchain-based ETFs in the US which attracted limited investment. Amplify Transformational Data Sharing ETF has $110m in assets. For example, the Amplify ETF “is an actively managed ETF that seeks to provide total return by investing at least 80% of its net assets (including investment borrowings) in the equity securities of companies actively involved in the development and utilization of transformational data sharing technologies.”
The press release refers to other big brands such as Apple, Intel, and Advanced Micro Devices, as some of the companies included in the Invesco Elwood Global Blockchain UCITS ETF. The index will arguably offer exposure to global companies in developed and emerging markets that are currently or will take part in the blockchain ecosystem. This is another investment opportunity opened by blockchain technology and one whose potential will possibly unravel in the long-term.