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Investing in Blockchain Via ETFs


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The Distributed Ledger Technology, or more simply, the blockchain technology, has the potential to revolutionize a spectrum of industries by bringing in a system that offers transparency, immutability, security and trust. Investors can seize upon this potential through a number of exchange-traded funds. 

A Deloitte survey from 2019 highlights the growing popularity of the blockchain among organizations, with 84% agreeing that the technology is scalable and will eventually become a mainstream practice. As blockchain adoption moves steadily forward on its journey from the “possible to the practical,” it needs a closer look from an investment perspective for retail investors.

The worldwide spending on blockchain solutions is expected to grow at a robust pace in the coming years. IDC estimates a five-year compounded annual growth rate of 73.2% (during 2017-2022), which would take worldwide blockchain spending to $11.7 billion by 2022. While Gartner estimates (based on quantification the value of technology innovation rather than the dollars spent on it) that the business value-add of blockchain will grow to slightly more than $176 billion by 2025, and will exceed $3.1 trillion by 2030.

Here’s a look at some exchange-traded funds which provide an investment opportunity in a diversified portfolio of companies from the blockchain technology space.

Amplify Transformational Data Sharing ETF (BLOK) is the biggest ETF in terms of assets within this category. BLOK is an actively managed ETF that invests primarily in companies which are involved in the development and utilization of blockchain technologies. The fund provides exposure to companies in North America (46%), Asia (42%) and Europe (12%). The portfolio is comprised of around 55 stocks with exposure to diverse sectors such as technology, financial services, semiconductors, software, commercial services, banks, computers and telecommunications. The fund has around $112.31 million as assets under management, an expense ratio of 0.70% and has posted 28.17% year-to-date (YTD) returns. It has around 37% of its assets in the top ten holdings, which include:

  • Overstock.com
  • GMO Internet
  • Digital Garage
  • SBI Holdings
  • Kakao
  • International Business Machine
  • Rakuten
  • Square
  • Galaxy Digital Holdings
  • Global Unichip

The Reality Shares Nasdaq NexGen Economy ETF (BLCN) is the second biggest fund in this space. The fund tracks the Reality Shares NASDAQ Blockchain Economy Index, which is a modified linear weighted index. The fund provides exposure to companies that are committing material resources to develop, research, support, innovate or utilize blockchain technology for their proprietary use or use by others. The fund’s investing universe spreads across North America (48%), Asia (37%) and Europe (15%) in sectors such as information technology, financials, communication services, consumer discretionary, industrials and consumer staples. BLCN has $71.98 million as assets under management, an expense ratio of 0.68% and has posted 25.16% YTD returns.

  • Advanced Micro Devices
  • Digital Garage
  • Accenture
  • Microsoft
  • SAP
  • SBI Holdings
  • Fujitsu
  • International Business Machine
  • Overstock.com
  • Nasdaq

The First Trust Indxx Innovative Transaction & Process ETF (LEGR) is the third biggest ETF in the category. It tracks the Indxx Blockchain Index, which is a composition of 100 companies that are enablers and users of the blockchain technology. The fund has a portfolio of around 101 companies with a large-cap tilt. The fund has $42.97 million as assets under management, an expense ratio of 0.65% and has delivered 21.06% YTD returns. The fund has a low concentration with 21% allocation towards the top ten holdings, which are:

  • Advanced Micro Devices
  • Microsoft
  • Wirecard
  • Texas Instruments
  • Micron Technology
  • Accenture
  • Fujitsu
  • SAP
  • Amazon.com
  • NVIDIA

The next ETF is the Innovation Shares NextGen Protocol ETF (KOIN). The fund provides access to companies that may benefit from a technology that has the potential to revolutionize the way global trade is conducted, data is secured, supply chains are managed, financial instruments are cleared, and contracts are recorded. The fund tracks the Innovation Labs Blockchain Innovators Index which is a compact index of primarily large-cap companies across countries, dominated by the U.S. at around 65%, followed by France (6.5%) and Taiwan (6%), among others. The fund has $10.46 million as assets under management, 0.65% as its expense ratio and has posted 27.63% YTD returns. KOIN has a portfolio of 48 stocks with the top ten adding up to around 43% of the total allocation. They include:

  • Taiwan Semiconductor Manufacturers
  • Intel
  • NVIDIA
  • Visa
  • Mastercard
  • Microsoft
  • Nestle
  • International Business Machine
  • Oracle
  • Cisco Systems

The Goldman Sachs Motif Finance Reimagined ETF (GFIN) is the most recent fund in the segment. It is a passive ETF with a portfolio of around 120 stocks and has the Motif Finance Reimagined Index as its underlying benchmark index. The ETFs provide exposure to the beneficiaries of technological innovation, regardless of sector, geography or market capitalization. Its focus areas are the digitalization of finance, blockchain and asset management makeover. In its short existence, it has garnered $10.06 million as assets under management and has an expense ratio of 0.50%. The fund has an allocation of 27% toward the top ten holdings, which include:

  • Mastercard
  • Visa
  • Square
  • PayPal Holdings
  • American Express
  • Intuit
  • Fiserv
  • Blackstone
  • Fidelity National Information
  • Global Payments

While blockchain offers great benefits and opportunity, it is still an emerging technology and faces multiple challenges in its journey towards seamless adoption across industries. Overall, these ETFs are a sound way to take exposure to companies globally that are actively involved in bringing blockchain closer to the mainstream.

Fund details as on July 30, 2019, based on factsheets and respective websites

Disclaimer: The author has no position in any stocks mentioned. Investors should consider the above information not as a de facto recommendation, but as an idea for further consideration.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.





This article appears in: News Headlines , Blockchain , ETFs , Investing Ideas
Referenced Symbols: BLOK , BLCN , LEGR , KOIN , GFIN



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