Reality Shares Files for a ETF Fund With Exposure to Bitcoin Futures

12. Feb 2019 Posted by Akolkar B on News

While that the SEC has been reluctant on its stand of approving a Bitcoin ETF, crypto companies are working to bring Bitcoin exposure to traditional ETFs. A unit of FinTech firm Blockforce Capital named Reality Shares ETF Trust has filed with the SEC for an exchange-traded-fund (ETF) that would invest in a portfolio comprising of both Bitcoin futures and sovereign debt instruments.

The Trust submitted its filing to the SEC on Monday, February 11. Dubbed as the Reality Shares Blockforce Global Currency Strategy ETF, the fund will be actively managed and listed on the NYSE Arca exchange. The SEC filing notes that the fund aims to provide exposure to global currencies including both - fiat and virtual currencies.

The filing also notes that the ETF will currently invest only in cash-settled Bitcoin futures contracts. Meaning, during the expiry, investors would receive cash equivalent of their contracts instead of the physical delivery of BTC tokens.

As a result, the Reality Shares ETF will invest in Bitcoin futures listed on the CBOE Futures Exchange LLC or the Chicago Mercantile Exchange (CME). The company said that in future it would be open to invest in other Bitcoin futures products available in the market. The Trust will make its investments through a wholly owned registered subsidiary named Cayman Islands. The filing notes that the fund “will not invest directly in Bitcoin.” Below is the complete statement in the SEC filing.

“The Fund may gain most of its exposure to Bitcoin Futures through its investment in the Subsidiary, which invests in Bitcoin Futures. To the extent the Fund invests in such instruments directly, it will seek to restrict its income from such instruments to a maximum of 10 percent of its gross income [...] to comply with certain qualifying income tests necessary for the Fund to qualify as a regulated investment company.”

Along with the Bitcoin futures, the ETF fund will also have major part of its portfolio investments in other traditional “high-quality, short-term sovereign debt instruments listed for trading on U.S. exchanges and denominated in U.S. dollar, euro, British pounds sterling, Japanese yen and Swiss francs.”

Below is the synopsis of how the fund will break its investments in different parts.

“The Adviser initially constructs the Fund’s portfolio by investing approximately (i) an equal-weight of 15 [percent] of the Fund’s net assets in Fixed Income Securities denominated in each Fiat Significant Global Currency; (ii) 15 [percent] of the Fund’s net assets representing notional exposure in Bitcoin Futures and (iii) 10 [percent] of the Fund’s net assets in Money Market Instruments for margin and/or cash management purposes, each as measured at the time of purchase (the ‘Target Portfolio’).”