Ninepoint finalizes Bitcoin fund change with launch of Web3 ETF

Ninepoint Partners has relaunched its bitcoin fund as a broader Web3 ETF focused on blockchain and digital asset companies.

Unitholders approved Ninepoint’s proposed change to the former Ninepoint Bitcoin ETF in a vote last month. The Ninepoint Web3 Innovators Fund (TSX: TKN; TKN.U) started trading on Wednesday.

The move comes after the start of a “crypto winter” in 2022 that saw the value of bitcoin and other cryptoassets plummet, exposing some firms operating in the space.

The Ninepoint Bitcoin ETF launched in January 2021. By November of that year, when bitcoin’s price was peaking above US$68,000, the Ninepoint fund had more than $72 million in assets under management. By Jan. 31, 2023, the ETF’s assets were down to $22.3 million.

Bitcoin and other cryptocurrencies have rallied this year, with the price of bitcoin above US$27,000 this week after starting the year below US$17,000.

Alex Tapscott, managing director of Ninepoint’s digital asset group, said the firm has always been interested in the larger investment universe around blockchain and digital assets.

“You shouldn’t have owned just AOL in 1995 and you shouldn’t just own bitcoin today,” Tapscott said. “There’s a lot of other exciting opportunities out there.”

Changing the bitcoin fund’s objective rather than launching a separate Web3 product made sense because the investors were on board, he said.

The fund will now invest in companies directly involved in crypto as well as larger companies that have launched blockchain groups or made significant investment in the space. “They’re not just paying lip service to this technology so you can slot them into the fund,” Tapscott said.

It will also include firms such as chipmakers that stand to benefit from broader Web3 growth.

“If you can imagine a world where economic activity, in finance and in other industries, is happening on blockchains, and people are spending time in virtual worlds where AI is critical to decision-making in business, then there are huge tailwinds to the re-engineering of the hardware stack for the world of business,” he said.

The Web3 fund, which has a high risk rating and a 1.45% management fee, can also allocate up to 30% to crypto ETFs.

Ninepoint’s fund isn’t the first with an interest in blockchain technology. The $19.5-million Harvest Blockchain Technologies ETF (TSX: HBLK), launched in 2018, tracks an index and invests in a mix of crypto miners, exchanges and smaller blockchain firms, as well as large-cap names such as Microsoft Corp. and Intel Corp. Its annualized return since inception is 0.64%, and it’s up 22% year to date. Its management fee is 0.65%.

The $578,000 CI Galaxy Blockchain Index ETF, launched in April 2022, also tracks an index and holds a mix of crypto miners, exchanges, large-cap tech and other companies. Despite being up 54% year to date, the ETF is down 40.4% since inception. Its management fee is 0.50%.

As for other bitcoin funds, managers said they aren’t rushing for the exits, despite the underlying asset’s drop in value last year.

“Our products have been designed for a specific objective — it is to provide the safest and most liquid access to crypto,” said Vlad Tasevski, chief operating officer and head of product with Purpose Investments Inc., whose bitcoin ETF has $809.9 million in assets under management.

Raj Lala, president and CEO of Evolve ETFs, whose bitcoin ETF has $78.2 million in assets, said his firm has considered creating a broader blockchain fund but so far hasn’t been sure of the market interest.

“We’ve always been interested in exploring the entire ecosystem of crypto and potentially investing in other areas of crypto aside from directly into the coin, but we don’t have any plans to make modifications to our existing fund,” he said.

“I’m hopeful the crypto winter is over,” Lala added.