The value of the units of an exchange-traded fund called Melanion BTC Equities Universe UCITS ETF, which is already licensed by the French supervisory authority, should reflect the price of bitcoin as closely as possible. Representatives of the investment company talk about a 90 percent correlation.
It will be possible to trade the fund’s shares on the Paris Stock Exchange Euronext. The investment will thus be available through brokerage firms and platforms.
However, the underlying asset will not be bitcoin, but up to thirty publicly traded European and North American companies operating in the field of cryptocurrencies and blockchain. Company Melanion Capital, which will manage the fund, has thus complied with the regulations governing collective investment in the EU.
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The legal form under the UCITS Directive, which stands for Undertakings for Collective Investment in Transferable Securities, is considered an international “gold standard” in the area of fund and investment regulation. UCITS funds provide investors with a high level of protection, for example against misappropriation of invested money.
Such funds, for example, must have a so-called depositary, which is independent of the management investment company. The depositary shall, inter alia, supervise the legality of the operations carried out by the fund.
If the fund owned bitcoin directly, it would be more complicated to offer it to investors, as it would not comply with the directive just mentioned in terms of portfolio distribution. In particular, large institutional investors would not be able to invest in it due to their internal rules. Thanks to the UCITS-compliant form, it is also easier to offer access to the fund to small retail investors.
“In connection with investments in bitcoin, institutional investors are most worried about hacker attacks, theft or loss. By investing in stocks that replicate the development of the bitcoin price, they will achieve a diversified portfolio. ” said Cyril Sabbagh, Director of Exchange Trading at Melanion Capital.
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The fund’s portfolio will include companies that deal with digital asset management, cryptocurrency mining, blockchain technology or own cryptocurrencies. The weight of shares of one company in the portfolio may not exceed ten percent. The portfolio will be composed of the companies that are part of it index Melanion Bitcoin Exposure Index. The French financial company created it in cooperation with the German company Bita.
The index includes, for example, companies Argo Blockchain and Riot Blockchain, which deal with cryptocurrency mining, the investment company Galaxy Digital of the entrepreneur Mike Novogratz and the broker Voyager Digital.
In addition to the Melanion BTC Equities Universe, the UCITS ETF already has several funds operating in the European market that invest in cryptocurrencies and blockchains. These are VanEck Vectors Digital Assets Equity UCITS ETF, Invesco Elwood Global Blockchain UCITS ETF and First Trust Indxx Innovative Transaction & Process UCITS ETF.
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