How investors can make the most of fund, which tracks cutting edge, 'transformative' technology firms
The man behind Canada’s first blockchain ETF insists investors should take a long-term stance and not get wrapped up in the volatility around the fledgling fund.
Michael Kovacs is founder, president and CEO of Harvest Portfolios Group, which began trading its Blockchain Technologies ETF (ticker HBLK) on the TSX last month.
With a management fee of 0.65%, it aims to match the performance of its own Harvest Blockchain Technologies Index – calculated daily by German company Solactive – and incorporates large cap companies as well as small, even micro, cap development firms, including some crypto miners.
The fund currently holds about $10 million in assets and Kovacs said investors should expect volatility around such a nascent industry, which he believes will transform the way businesses work and transact.
He said: “[$10 million] is not huge but we’re happy with that because, as it launched, the market came down and a lot of blockchain stocks came down and tempered people’s enthusiasm. From our standpoint, that doesn’t really matter, it’s a long-term positioning that we see having many great opportunities over the next 10-15 years.”
Kovacs said the penny dropped that this was an area Harvest needed to be a part of when he and colleagues learnt that the Australian Stock Exchange was replacing its back office with a blockchain system. He compares the make-up of companies involved in blockchain development as similar to the early days of the internet.
He said their ETF is a high-risk investment that can occupy a small position in your portfolio. “Let the fund do what it is supposed to do over the next numbers of years. If you are watching this thing day to day, it’s going to drive you crazy; it could be up 4-5%, it could be down 4-5% - it moves around that much.”
The self-created blockchain index, Kovacs said, allows Harvest to watch a cross-section of companies involved in the space and enables them to track the industry as companies disappear or grow. He admits no one yet knows which companies will be the winners when, as Harvest predicts, blockchain will be considered mainstream in 2025.
Over time, as smaller cap companies mature, they will occupy a larger portion of the fund. Kovacs picked out two companies in the ETF that particular excite him with their blockchain developments: small cap retail firm Overstock, which sells household items on the internet, and large cap firm Visa Corporation.
He said: “Visa Corp is developing blockchain architecture where they are setting up financial institutions all around the world to provide technology so individuals and corporations can transact instantaneously at very, very efficient cost.
“For example, if you wanted to send money to a relative in South America, for example, you can do that through blockchain instantaneously on your phone when this technology is developed. Right now, you can pay up to 10% to carry out these transactions, which can take 2-3 days. That’s all going to be eliminated and Visa Corp is developing this as we speak.”