Mertz didn’t respond to Bloomberg instant messages or an email to his Bloomberg address. “Since this fund was founded, it seeks growth in the financial service sector—and it hasn’t changed,” read a quote from Mertz in The Wall Street Journal. Morningstar’s report notes that Russell is the one who tends to focus on banks “and recently cryptocurrencies.” The fund managers argue that investments in Voyager Digital and Mike Novogratz’s Galaxy Digital Holdings are based on following them for years and wagering that they could move beyond crypto and into more traditional financial services. They also say they were concerned about banks with large exposure to commercial real estate during the pandemic and now might feel more comfortable investing in them again.
I suppose that’s believable (though just this week Galaxy agreed to buy crypto custodian BitGo Inc., hardly a sign of a pivot into more typical banking). Either way, it doesn’t seem as if it truly matters. According to the fund’s prospectus, “it will, under normal conditions, invest at least 80% of the value of its assets in stocks of companies principally engaged in the banking or financial services industries.” It considers Voyager Digital and Galaxy Digital “investment services,” according to a fact sheet, while Morningstar labels Voyager a tech stock. Even after paring back some of its exposure to Voyager, which has gained a staggering 12,873% over the past year, it remains far and away the largest holding in the fund. Emerald also holds some of the company’s shares in its Growth Fund and Insights Fund.