Index-Style Cryptocurrency Fund Launches in Australia

A new index-style cryptocurrency fund has launched in Australia providing exposure to either Bitcoin only or a basket of different cryptocurrencies.

It’s good news for Australian cryptocurrency wholesale investors. On August 2nd, 2018, Bitcoin startup CoinJar introduced its Digital Currency Fund. The fund allows wholesale investors access to cryptocurrency markets, with minimal hassle. To qualify, investors must have AUD$2.5 million in net assets or AUD$250,000 in annual income. The CoinJar Fund then, “takes on the management and security of the assets on behalf of the investor.” They secure investor’s cryptocurrency assets in “multi-signature digital wallets,” which “provide an additional layer of security for investors”, the company explained.

SPOILT FOR CHOICE

The fund has two classes. Both offer wholesale investors a convenient way to invest with Australian Dollars. The first, called Bitcoin Class, provides exposure to Bitcoin 00 only. The second, called Mixed Class, tracks various cryptocurrencies. Weighted by fixed supply, it provides a mix of Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), and Litecoin (LTC). Management fees differ per fund class. For the Bitcoin Class, it’s 1.3% per annum. For the Mixed Class, it’s 1.8%. Neither fee includes normal operating costs. There is a minimum investment rule for new investors. The initial investment must be greater than AUD$50,000. Thereafter, further investments must surpass AUD$10,000.

WILL INVESTORS DRAW TO INDEX-STYLE FUNDS?

Passive investment vehicles, such as Index-Trackers, have become popular in mainstream financial markets. According to Bloomberg, more than a third of all assets in the U.S. are in passive funds, up from about a fifth a decade ago. For years, Institutional Investors have sold the idea of ‘reduced risk’ through diversification. Asset owners, and Pension Funds, in particular, have lapped it up. Passive investment has its harsh critiques. Some warn of increased systemic risk.  Others go so far as to claim passive markets are worse than Marxism. Nonetheless, passive investment is mainstream in financial markets. The jury is still out as to whether index-style funds will enjoy success in cryptocurrency markets. Nevertheless, passive investment practices are similar to ‘hodling’ bitcoin albeit differences in market size. Will Index-Style Funds enjoy success in Cryptocurrency Markets?

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