Cryptocurrency lending company BlockFi is partnering with investment manager Neuberger Berman to launch a series of crypto investment products, like exchange-traded funds (ETFs), which are taking the digital currency market by storm.
Only weeks ago, BlockFi filed with the Securities and Exchange Commission to list its “BlockFi Bitcoin Strategy ETF,” which kicks off a 75-day regulatory approval process. As proposed, the fund will hold Bitcoin (BTC-USD) futures contracts, similar to ETFs listed last week by ProShares and digital asset manager Valkyrie.
In preparation for a targeted release of mid-to-late December, BlockFi and New York City-based Neuberger have formed a separate corporate entity, BlockFi nb LLC.
The joint venture will hold BlockFi’s ETF, in addition to other products, with the anticipation that there is more demand to reap from a growing wave of institutions looking to plow their assets into crypto products suited for U.S. capital markets.
“Currently in the markets we are witnessing a huge shift in investor sentiment towards digital assets, along with demand to partner with trusted firms with demonstrated crypto expertise and institutional rigor and leadership in asset management,” Greg Collet, president of the newly formed joint company, BlockFi | nb, told Yahoo Finance.
As the first ETF that holds Bitcoin futures contracts, ProShares' (BITO) reaped more than $1 billion in assets in only a few days, making it the second most traded ETF debut.
At the same time, the amount of BTC futures contracts that the fund can hold is already close to reaching its monthly limits — sparking some concerns the ETF will need to increasingly invest its assets in futures contracts with longer expiration dates. That outcome could impact the product's ability to track returns achieved by investors who directly hold Bitcoin.
Yet Valkyrie CEO Leah Wald told Yahoo Finance last week that buyer demand for Bitcoin ETFs is so robust that at least another “two or three” new fund products could earn the same total assets under management (AUM).
Additionally, VanEck’s Bitcoin Strategy ETF (XBTF) listing this week, and others are expected to roll out in November, underscoring the stiffening competition for market share.
Collett suggested the partnered fund would rely on “cost-effective and convenient access” advantages. VanEck’s management fee of 0.65%, already undercuts that of ProShares and Valkyrie at 0.95%, raising the question about whether BlockFi would take an even lower cut.
While BlockFi and Neuberger declined to comment on fee structure, a spokesperson with BlockFi pointed to pension funds such as the recent $25 million deployed by the Houston Firefighters Pension Fund. That is one recent example of how larger and more risk-averse institutions are beginning to seek opportunities to invest in crypto.
A September report from financial broker Fidelity Digital Assets also highlighted this trend. According to their findings, U.S. pension funds surveyed such as worker benefit plans and endowments are showing increased interest in crypto.
However, many of the funds surveyed still hold a “fairly negative view of digital assets” — primarily because of the alternative asset’s volatility according to Christine Sandler, Fidelity Digital Assets’s Head of Sales & Marketing.
“U.S. institutional investors we surveyed have indicated a greater propensity for digital asset investment products than direct ownership of cryptocurrencies. From our study, we also know that pension funds and defined benefit plans, like many other institutional investor segments surveyed, favor active management of an investment product containing digital assets,” Sandler told Yahoo Finance.
David Hollerith covers cryptocurrency for Yahoo Finance. Follow him @dshollers.
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