VanEck Debuts Digital Assets ETF
It doesn’t invest in actual digital assets but the companies that support the space.
Today, VanEck Global rolled out an ETF that invests in companies involved in the digital assets industry. The VanEck Vectors Digital Transformation ETF (DAPP) focuses on firms generating significant revenue from digital asset holdings or projects related to digital assets. VanEck defines digital assets as assets that are “issued or transferred using distributed ledger or blockchain technology,” a presentation from the issuer says.
DAPP comes with an expense ratio of 0.65% and lists on the Nasdaq stock exchange.
“It’s not just about bitcoin or cryptocurrency. There’s this ecosystem of companies that are embracing blockchain and the distributed ledger [concept]. And that is what we mean by digital transformation,” said VanEck Product Manager J.P. Lee.
“Digital transformation companies cover a broad swath of the investment landscape related to digital assets, well beyond what’s taking place with cryptocurrencies like bitcoin. It’s also important to note that digital transformation represents a long-term structural growth story, supported by significant ongoing investment and adoption on a global scale by both retail and institutional investment participants,” said Ed Lopez, a VanEck managing director and the head of ETF product at the firm.
Methodology
According to its prospectus, DAPP tracks the MVIS Global Digital Assets Equity Index, which looks to capture the performance of companies generating the majority of their revenues from digital assets or that have the potential to do so in the future or that have at least half of their assets invested in digital assets. In this manner, the fund allows investors to get in at the ground floor of a new and developing industry. It does not invest in actual digital assets or their derivatives, however.
The part about the potential of firms to derive more than half of their revenues from digital assets is particularly important because it is an acknowledgment of the newness of this particular space. Lee notes that DAPP would not have been possible to bring to market even one year ago.
“We are providing exposure to early movers in the space with the hope that they can participate and grow as digital assets, digital assets adoption and digital assets engagement grows around the world. When you think about the timeline about where we are on the S curve, we are still very early in the adoption life cycle,” Lopez said.
The VanEck presentation notes that digital assets can include cryptocurrencies; platforms related to digital strategies; decentralized applications; and nonfungible tokens. The categories of business activities covered by the fund include payment gateways; hardware; cryptocurrency miners; cryptocurrency trading and storage; exchanges; digital assets patents and services; and banking and asset management services related to digital assets.
At the end of March 2021, the ETF’s underlying index included 25 securities, the document says. Top holdings include Voyager Digital, Marathon Digital and Square, with U.S. companies representing 48% of the portfolio.
(Use our stock finder tool to find an ETF’s allocation to a certain stock.)
Contact Heather Bell at [email protected]
