Blockchain technology has been one of THE trending story lines in recent months, and starting Wednesday investors will be able to participate in this nascent and fast-growing sector with the launch of the Amplify Transformational Data Sharing ETF (BLOK).
This fund was initially filed with the Securities and Exchange Commission in November as the Amplify Blockchain Leaders ETF. But both that product, along with a competing product from Reality Shares that will be an index-based ETF and which is also expected to launch on Wednesday, were prodded by the SEC to drop the word “blockchain” from their respective names.
The BLOK product will be an actively managed fund comprising both core and secondary companies involved in the blockchain sector. Core companies are those with significant direct revenue from blockchain-related business and/or are among the largest five investors in blockchain-engaged companies.
Secondary companies directly invest or partner in transformational data sharing technology companies, or participate in multiple blockchain industry consortiums.
Christian Magoon, CEO of Amplify ETFs, says BLOK is a global portfolio with roughly 70 percent of its constituents being U.S.-based. The 30 percent that’s non-U.S. will be mainly in China, Canada and Japan. He expects the top 10 holdings to comprise about 45 percent of the portfolio.
The fund's top 10 holdings include some familiar large-cap companies including Taiwan Semiconductor, IBM, Nvidia and Citigroup, as well as unfamiliar names such as Digital Garage and Hive Blockchain Technologies. Its expense ratio is 0.70 percent.
Toroso Investments LLC is the sub-advisor calling the shots on investment strategy and portfolio selection.
“Toroso has been investing in blockchain-based companies and cryptocurrencies, and they have a lot of experience with ETFs,” Magoon says. “So with them it’s a blend of expertise in this particular market sector and in the underlying ETF wrapper.”
Blockchain Basics
Blockchain is a digitized distributed ledger, or database that was created to record and verify transactions made by virtual currencies such as bitcoin. Blockchain stores transaction data in blocks that are linked together to form a chain, and the blockchain grows as the number of transactions grow. Information stored in the database is supposedly immutable, and blockchain's decentralized structure is thought to protect it against cyberthieves.