Osprey Bitcoin Product Debuts

February 16, 2021

Today, Osprey Funds, run by Greg King, who is also founder and CEO of REX Shares, launched a fund that will compete with the Grayscale Bitcoin Trust, which trades under the ticker GBTC.

The Osprey Bitcoin Trust (OBTC) is not an ETF, but a Delaware grantor trust that holds bitcoin. According to King, OBTC is the cheapest available bitcoin investment vehicle, with a management fee of just 0.49%, with additional fees (mainly for custody) expected to remain 30 basis points or less, which would put the total cost at 79 basis points or less.

That’s cheaper than the existing GBTC, which charges a total annual fee of 2%. However, keep in mind that the structure of these funds can cause them to develop significant premiums, as the demand for the products is strong and the shares are limited.

OBTC is also the first bitcoin trust to be custodied with Fidelity Digital Assets, a division of Fidelity Investments that is dedicated to the storage of digital assets.

What Main Street Wants

“We felt that was very important for Main Street investors, who are familiar with Fidelity,” he said, adding that his firm has prioritized transparency and low costs.

A bitcoin ETF has been the holy grail, but the SEC has been reluctant to approve such a product. As a result, grantor trusts holding the cryptocurrency have begun to spring up from issuers like Grayscale and Bitwise. With bitcoin passing the $50,000 price point this week, there is no doubt that investors will be clamoring even more loudly for such a product in an ETF wrapper.

“From a risk/reward perspective, for most portfolios, [bitcoin] makes a lot of sense. Diversified portfolios, by definition, are composed of many different exposures, and any asset investors can get exposure to that is uncorrelated to broad-based equity markets is going to be viewed very favorably,” King explained.

“A small but right-sized allocation to bitcoin in most portfolios improves the risk-adjusted return,” he added, noting that OBTC is priced more like an ETF than a hedge fund.

Contact Heather Bell at [email protected]

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