Reality Shares, iShares Plan Innovative Funds

November 06, 2017

Last week, two ETF issuers filed for unique ETFs, with iShares looking to launch an actively managed “gold exposure” ETF and Reality Shares planning the first index-based blockchain technology ETF.

Blockchain In An Index

Reality Shares, a firm previously focused on dividend strategies, recently filed for an ETF that will seek to track companies involved with blockchain technology. The Reality Shares Nasdaq Blockchain Economy ETF will target companies expending material resources working with bitcoin technologies, whether that be to develop, use or support blockchain and related technologies.

Blockchain is a method of storing transaction data that is an instrumental technology driving the bitcoin cryptocurrency.

Some of the areas in which the companies in the fund’s index are active are developing more efficient distribution and verification of cross-border payments, more efficient storage and security around digital data in the cloud, and generally improve upon security and efficiency of transactions, according to the prospectus.

The index can include stocks from developed and emerging markets. Eligible companies must have more than $200 million in market capitalization and a six-month average daily trading volume of more than $1 million.

The companies are scored based on their likelihood of benefiting from their blockchain-related activities. The index selects the 50 to 100 companies with the highest scores and weights them based on those scores. It is rebalanced every six months.

Amplify ETFs has also filed for a fund—this one actively managed—targeting companies involved in the blockchain space.

The Reality Shares fund is set to list on the Nasdaq, but the filing did not include a ticker or expense ratio.

Gold Exposure Fund

BlackRock’s iShares unit has filed for an actively managed ETF that will invest in a wide range of gold-related vehicles. The iShares Gold Exposure ETF ultimately seeks to offer investors exposure to the price performance of gold.

The fund is classified by the Commodity Futures Trading Commission as a commodity pool, and can invest in futures contracts and other derivatives and exchange-traded funds and notes linked to physical gold, among other investments.

Although actively managed, the fund seeks to maximize its correlation with the Bloomberg Composite Gold Index, and the prospectus notes it will generally hold the same futures contracts as those included in the index and roll them according to the same schedule.

The fund will also implement a cash management strategy to generate additional income via cash, cash equivalents, government debt and investment-grade fixed-income securities.

The portfolio includes a Cayman Islands-based subsidiary, as is common with many commodity funds. Up to 25% of the fund’s total portfolio can be invested in the subsidiary, which will hold gold investments, cash and cash equivalents, the prospectus said. Excluding the subsidiary portion of the fund, the ETF will mainly hold fixed-income securities both as an investment and as collateral for the derivatives held in the subsidiary.

The filing did not include a listing exchange, expense ratio or ticker symbol.

Contact Heather Bell at [email protected]

 

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