Product is simple, says CIO, but is future-proofed as the market develops
One of the ETF industry’s enduring qualities is its ability to take complex issues and present them to investors in a relatively simple way. While the machinations of blockchain and the cryptocurrencies it produces can be difficult for the average investor to grasp, Evolve ETFs recently distilled it into North America’s first multi-crypto ETF, the Evolve Cryptocurrency ETF (ETC).
The fund’s genesis began earlier in the year when Evolve was just a day behind Purpose Investments in launching its Bitcoin fund, although Evolve was the first in the world to debut an Ether ETF, providing exposure to the second largest cryptocurrency.
That same month, however, Ether went up 50% and Bitcoin went down 4.2%, and investors were immediately asking whether there was a way to invest in crypto as a category to get exposure to more than just one currency. Evolve took that idea and kept it simple – the Evolve Cryptocurrency ETF is passive, holds Bitcoin and Ether ETFs as a fund of funds, is market-cap-weighted, and is rebalanced every month.
According to Evolve CIO and COO Elliot Johnson, it’s the ideal set-it-and-forget-it product for those who want exposure to both cryptocurrencies – but he believes the real potency of the ETF could be yet to come.
“If the regulators allow for other cryptocurrencies to be put into an ETF – so let's say Evolve were to launch a Polkadot ETF, or one of the other cryptocurrencies – we can add that to this fund and increase the scope of its reach,” Johnson explains. “That's not to say we can just add anything we want – we have to launch those other cryptos in their own ETFs, they have to be approved by the regulators, and we have to be able to get them launched. But if we were able to do that, it’s a bit of future-proofing as the market develops. As we do more in cryptocurrencies, then the product becomes better over time. It’s pretty straightforward, but it's something we got asked about from day one, so we're happy to bring it to market.”
More crypto ETFs in the fund would help advisors smooth out a volatile asset, and Johnson is excited to see more investors using cryptocurrencies as a portfolio tool, like they would a gold ETF.
Another trend Johnson has his eye on, which Evolve invests in via it’s the Evolve Innovation Index ETF (EDGE), is 5G networking. The rise of 5G is connecting even more devices to the internet, in turn sparking the need for greater cybersecurity – another huge growth driver and theme in Evolve’s ETF suite via its Evolve Cyber Security Index Fund (CYBR).
Johnson says the key is that mobile devices are increasingly interacting with the world and understanding what’s around them. The way cloud services combine with smart device information, whether it's GPS or other sensors, is changing our world.
“Those end points need to be secure, and I think cybersecurity is going to be very relevant,” he says. “The model has changed – 30 years ago, each computing device was its own thing, and it lived in isolation. Now nothing lives in isolation; everything's connected. Put your phone on airplane mode and it's not a very fun thing to have in your pocket anymore. You need to be on the network.
“It’s mobile communication and smarter devices combined with the cloud. This is how the world is changing, and cybersecurity is at the centre of that. You can't do any of this stuff if you don't have secure data.”