Investing in the ever-growing popular blockchain technology could be more easily accessible as Harvest Portfolios Group looks to launch the country's first blockchain exchange-traded fund.
Last week, Harvest Portfolios filed a preliminary prospectus with regulators in hopes of becoming the first firm to introduce an ETF that tracks blockchain technologies. With the ticker HBLK, Blockchain Technologies ETF has a management fee of 0.65 per cent and seeks to replicate the performance of the Blockchain Technologies Index.
"Blockchain technology is creating revolutionary and disruptive change at many levels," Michael Kovacs, president and chief executive officer of Harvest, said in a statement. "During this nascent stage of development, blockchain technology is providing new opportunities for business, government and many other conduits of information and financial exchange. HBLK provides a simple way for investors to participate in the growth of this fast-developing sector."
Blockchain is an online digital ledger that keeps a record of recent transactions. Once a transaction is completed, it goes into a blockchain database and is kept as a permanent secure record. It is most commonly known as the technology behind the function of the booming cryptocurrency bitcoin – which soared above $18,000 (U.S.) last month.
With investors now becoming more comfortable with digital currencies and blockchain technology, ETF providers have been looking to get in on the game. Already there are at least two investment companies in Canada that have applied for regulatory approval to offer bitcoin ETFs. In the United States, there are another 19 ETF filings targeting bitcoin and blockchain technology including funds that would use leveraged or inverse strategies and could see returns rise – or fall – twice as fast as the price of bitcoin on a given day.
If approved, Harvest would be the first blockchain ETF to launch in North America. Mr. Kovacs says the company first started working on the investment idea last summer.
"It was during a time when everyone had a huge interest in bitcoin and cryptocurrency assets, but we had much more of an interest in the underlying technology around the blockchain," he adds.
Mr. Kovacs hopes to launch HBLK later in the first quarter of 2018 based on regulatory approval, and says unlike bitcoin, blockchain technology is becoming a more common business strategy with many large-cap companies such as IBM Corp. and Accenture PLC.
"When you really drill down into how these cryptocurrencies exist in the first place, it's because of the underlying blockchain technology," Mr. Kovacs says. "And when you really drill down into the businesses, there are quite a few large-cap companies that are developing blockchain platforms."
The Blockchain Technologies Index, owned and created by Harvest, has been designed to track the performance of issuers in both the large-cap blockchain segment and the emerging blockchain segment exposed to the development and implementation of blockchain technologies in North America.
The large-cap segment includes companies exposed to the development of blockchain-based technologies that must meet certain criteria, such as a minimum $10-billion market cap, and are listed on a recognized North American stock exchange. There are 10 issuers in the index. The emerging blockchain segment is comprised of up to 50 issuers exposed to the development of blockchain-based technologies that meet certain criteria, such as a minimum $50-million (Canadian) market cap, are listed on a North American stock exchange and have communicated a business strategy dedicated to the development and or implementation of blockchain technologies.
A listing of the top holdings in the index is currently unavailable to the public as the index is pending regulatory approval.
In addition to HBLK, Harvest has filed a preliminary prospectus to launch four other ETFs: Harvest US Bank Leaders Income ETF (HUBL and HUBL.U), Harvest Global Resource Leaders Income ETF (HRES), Harvest European Leaders Income ETF (HEUR) and Harvest Banks & Buildings Income ETF (HCBB).