The first ETF has been filed by a new digital asset manager

  • The suggested product aims to combine S&P 500 Index exposure with bitcoin futures contracts.
  • Michael Willis, the founder of Digital Funds, believes that digital assets will “replace the financial legacy system.”
  • The firm intends to file for a spot bitcoin ETF as well as other cryptocurrency-related products.

A new digital asset management has filed for its first exchange-traded fund (ETF), which aims to provide exposure to the S&P 500 Index as well as limited access to bitcoin.

According to a March 11 regulatory filing, the Digital Funds S&P 500 Bitcoin 75/25 Index ETF will invest around 75% of its assets in significant US corporations within the S&P 500 Index and 25% of its assets in bitcoin futures contracts.

The fund may invest in the Grayscale Bitcoin Trust (GBTC) or bitcoin ETFs trading in other countries due to unique market conditions for bitcoin futures contracts, according to the filing. The ETF does not invest in bitcoin directly.

Michael Willis, the ETF’s portfolio manager, described bitcoin as “very volatile,” suggesting that a bitcoin portfolio with S&P 500 exposure would be more stable.

“The S&P 500 Index is the apex asset for Wall Street, and bitcoin is the apex asset for the digital world,” he stated in an interview.

“It’s our fusing of the two investment ecosystems that exist in two major categories out there.”

According to Nathan Geraci, president of The ETF Store, a small investment to bitcoin has traditionally benefited the risk/return characteristics of a diversified portfolio. Given bitcoin’s volatility, he continued, proper position sizing and consistent rebalancing are essential for realising these gains.

Digital Funds’ proposed ETF is similar to Simplify ETFs’ US Equity PLUS GBTC ETF (SPBC), which can invest up to 15% in GBTC. Since its inception in May of last year, the fund has grown to almost $100 million in assets under management.

“I believe there is a limited audience for these types of products,” Geraci said, “since I believe most advisers and investors are likely to seek a solo bitcoin allocation.” “Typically, ETFs that bundle several asset types have an uphill battle to succeed.”

“The future” is digital assets.

Digital Funds was formed by Willis in December. He was the primary portfolio manager for the Index Funds S&P 500 Equal Weight mutual fund since its creation in 2015. He previously created the Wall Street financial technology business ONEFUND.

Willis has worked at UBS Financial Services, Paine Webber, and Smith Barney in the investment banking business.

Willis noted in an interview that Digital Funds’ products will all be focused on digital asset investing. The business intends to file for a few more products, including a bitcoin spot ETF.

Although the Securities and Exchange Commission has not yet approved an ETF that invests directly in bitcoin, it has allowed those who invest in bitcoin futures contracts to begin trading. Willis believes the agency will not approve a spot bitcoin ETF anytime soon.

Willis, however, believes that digital assets will “replace the financial legacy system.” He emphasised that a flood of regulated digital investment products is on the way, despite the fact that the initial $2 trillion or so in assets that entered the field were primarily unregulated.

“You have instant settlement, 24/7 trade, and programmable tokens,” he explained. “It’s the future,” says the author, “but we believe investors want a safe and secure means to enter that sector.” All of our goods will be registered with the Securities and Exchange Commission, and we believe that this will be the key to unlocking the greater assets.”

Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.

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