Virtual currency exchange Coinbase has announced that it will be launching an index fund, a first for the firm, indicating that it is entering asset management. Coinbase, which with a valuation of $1.6 billion is currently the world?s largest virtual currency company, has created a unit known as Coinbase Asset Management that will be responsible for overseeing the new index fund.
According to a product lead for Coinbase, Reuben Bramanathan, investors will be given exposure to all the assets listed on GDAX, the institutional exchange of the virtual currency firm. Per Bramanathan the index fund will be weighted based on market capitalization. New assets will be added automatically to the fund once they get listed.
Initially the index fund will be available to accredited investors residing in the United States. However Coinbase was developing more assets which would be accessible to a wider array of investors and which covered more digital assets. This might require Coinbase to get permission from the Securities and Exchange Commission.
?Our objective here is to get to a position where we do launch a fund that?s available to retail, but given the regulatory hurdles, we wanted to offer something to institutional and accredited to begin with,? said Bramanathan.
Coinbase will also launch the Coinbase Index which the new fund will track. The index benchmarks the performance of assets that are listed on the exchange. Currently the digital currencies that are listed on Coinbase include Litecoin (LTC), Ethereum (ETH), Bitcoin Cash (BCH) and Bitcoin (BTC). An automatic rebalancing of the index will occur every time there is a new listing.
Other index funds
Following the boom in virtual currencies, there has been an explosion in the number of crypto index funds and hedge funds that have been launched. Per Autonomous NEXT data approximately 225 crypto funds currently exist across 7 strategy types. The value of assets in these funds are estimated to range between $3.5 billion and $5 billion.
Other firms which offer virtual currency funds include Grayscale Investments and Bitwise Asset Management. The index fund of Coinbase is cheaper compared to the two as it charges a 2% fee while Grayscale charges 3% and Bitwise 2.5%.
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