A Wealthsimple Trade app icon seen on a smartphone.Jesse Johnston/The Canadian Press
Wealthsimple Inc. is giving group retirement clients the option of investing in cryptocurrency, a move that extends the Toronto-based fintech’s recent foray into the booming crypto sector.
Wealthsimple Work, the arm of Wealthsimple that manages group retirement savings plans (GRSPs) for employers, has added a cryptocurrency portfolio to its investment options, which will allocate between 1 per cent and 5 per cent of money invested for bitcoin and ethereum exchange-traded funds.
Crypto ETFs – the first of which was approved by Canadian regulators in February – give retail investors exposure to bitcoin or ethereum without having to hold the digital currency directly. Wealthsimple says its crypto GRSP is the first group retirement fund of its kind.
“It was clear to us from all the activity on our own crypto-trading platform that Canadians are excited about crypto and interested in exposure to the assets,” said Tim Kalimov, head of Wealthsimple Work. “That’s really what motivated us to design this product,” he added.
When companies sign up for Wealthsimple Work, they can choose which kinds of investment products they want their employees to have access to. Employees go through an onboarding process that explains the types of investments available, before getting direct access to their own GRSPs, and can then opt to place a “crypto allocation” in their portfolio.
The company announced the launch of the new fund on Thursday, acknowledging the risk associated with investing in crypto – a highly volatile asset class – saying it is different from other investments in that it could “lose most or even all of its value,” but also “grow in a way that few investments have the possibility of doing.”
Ben Reeves, Wealthsimple’s chief investment officer, told The Globe and Mail that the decision to limit an investor’s crypto exposure to just 5 per cent was made because of the volatility of digital assets and the fact that GRSPs are long-term retirement funds.
“There’s a reasonable view out there that this is a transformational technology and thus the value of crypto will continue to increase at a rapid rate, but there’s also a reasonable view that crypto is overvalued and might decline,” he said.
Mr. Reeves said the company thought it was prudent to launch the product by offering exposure just to bitcoin and ethereum, two of the largest digital currencies by market cap. An algorithm picks the best crypto ETFs by factoring in trading costs and investment management fees, and adapts according to new crypto ETFs that come to market. There are currently more than 25 crypto ETFs available on Canadian public markets.
Wealthsimple Work launched in April this year and according to its website, hundreds of companies use the platform. Mr. Kalimov said that most of Wealthsimple Work’s clients are companies that have fewer than 1,000 employees, but were not necessarily just small startups. “We have old family businesses, law firms and other kinds of professional firms,” he said.
Wealthsimple was founded in 2014 as a “robo-adviser,” providing automated wealth management services online geared mainly toward younger and less savvy investors. But over the past several years, the company has expanded its product offerings, adding a highly popular zero-commission stock-trading platform, a peer-to-peer money transfer service and more recently, a crypto-trading platform.
In May, the company raised $750-million in a funding round backed by some of Silicon Valley’s most prominent venture capitalists, which valued Wealthsimple at $5-billion, a substantial bump from its $1.4-billion valuation in November, 2020.
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Vanmala Subramaniam