When it came to launching the Schwab Crypto Thematic ETF (STCE) earlier this month, timing wasn’t the top priority for the issuer.
“In the case of the Schwab crypto thematic ETF, it happened to be in the period where people were referring to the ‘crypto winter,’ but for us, it's really all about identifying the long-term theme and listening to clients,” David Botset, managing director at Schwab Asset Management. During ETF.com’s Exchange-Traded Fridays Podcast last week, he compared the crypto-related exchange-traded fund to the launch of dividend ETFs a decade ago, when clients communicated a “need for income.”
“Over time, there are going to be ups and downs in this category of investment. The fact that we're launching now in what is a volatile time is just a matter of coincidence, because we weren't necessarily trying to time it to anything related to valuations,” he said.
Schwab isn’t the only major ETF issuer jumping on the crypto bandwagon, despite the lack of regulatory clarity. What sets its new crypto product apart from its competitors, according to Botset, is its expense ratio of 0.30% and its index methodology.
“We made an acquisition of some intellectual property a couple of years ago, it's a natural language processing that is able to assess huge amounts of publicly available information and [company] data,” he said. “So we use that; we combine it with human insights and systematic models to assess potential constituents.”
The company believes this methodology allows them to identify companies early that are best-positioned to benefit from maturation of the crypto space, including companies like NCR Corp., which acquired Bitcoin ATM operator Liberty X a year ago.
“We look at those and then we select and weight those constituents based upon that analysis in the determination of what we call a thematic beta,” he said.
Contact Daria Solovieva at [email protected]