Here’s a Bitcoin ETF you can buy right now

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It is offered by a Canadian company that is a testing ground for crypto funds and other novelties. US citizens can sometimes enter.

Count on the country with a reputation for heaviness to deliver the wild and crazy stuff.

A bitcoin ETF holding coins, not futures. An exchange-traded fund that holds bank deposits. Things that look like shares of Amazon or Tesla but pay a dividend. A refundable life annuity.

Such innovations have not yet been tried in the United States or are outright banned here. They’re all on the menu at Purpose Unlimited, a Toronto fund manager whose creative force is Som Seif.

Seif, 47, launched the firm in 2013 and has built it to $12.6 billion in assets under portfolio management, plus an additional $4.6 billion administered as a back office for financial advisers in Canada. (These and other numbers are converted from Canadian dollars to US dollars.)

Somehow, this outfit rivals BlackRock, Vanguard, and Fidelity, each managing trillions of dollars. It’s not a win-win business, says Seif. It is the most fragmented company in the world.

And one in which small companies sometimes eclipse large ones. This bitcoin ETF is something that BlackRock and many other players would love to offer in the United States. The United States Securities and Exchange Commission has rejected all proposals for ETFs that directly hold coins, although it has allowed ETFs that hold coin futures contracts, which places an additional layer of intermediaries between the speculator and the coins.

Purpose says its bitcoin ETF, approved by Canadian authorities in 2021, was the first on the planet. Together, his various crypto ETFs hold over $1 billion. Says Seif: That’s $1 billion that wasn’t taken from FTX or some other scam.

How come Canada is years ahead of the US in official digital currency tolerance? Seif spent a lot of time wooing bureaucrats before dropping a registration statement on them. Regulators are there to engage, he says. This can lead to more innovation. Another thing Canada has to offer, he says, is a welcoming attitude toward immigrants. Seifs’ father, who holds a Ph.D. in chemistry, is an Iranian expatriate.

Som Seif began following in his father’s footsteps with an engineering degree from the University of Toronto, but later moved into investment banking. At the Royal Bank of Canada, he crossed paths with Claymore Securities, a Chicago firm specializing in unit investment trusts, a cousin of ETFs.

At age 28, Seif landed the job of starting the Claymores Canadian ETF business. In seven years, it has grown from nothing to $5.8 billion in assets. It gave him, when the operation was sold to BlackRock in 2012, the credibility and the cash payment (he won’t say how much) to walk away on his own a year later.

Objective: Find niches. The bank deposit ETF, which currently yields 5%, is a creative way to extract interest from institutions that aren’t used to paying market rates on demand deposits. Seifs’ variation on single-stock ETFs, available for Alphabet, Amazon, Apple, Berkshire Hathaway and Tesla, manufactures a payout for the yield-hungry by combining leverage with selling call options on some of the holdings. Its gold bullion fund competes with SPDR Gold Shares by allowing investors with as little as $62,000 to redeem one-kilo gold bars; with the SPDR product, you cannot come to the trade window with less than $17.9 million.

The newest of the Seifs novelties is Purpose Longevity, a lifetime annuity with a payback feature. It is structured, unconventionally, like a mutual fund.

When you retire, you invest, say, $100,000 and receive annual payments, currently set at just under 7% for a 65-year-old. The money is invested in a moderately risky portfolio consisting mainly of stocks and bonds. At this point, you’re pretty much where you would be if you invested in a Vanguard balanced fund and asked Vanguard to give you 7% of what’s left over annually. At Vanguard, your payouts will decrease if the fund returns less than 7%.

Buy Purpose Longevity and you’ll have a somewhat reduced withdrawal option, but a better chance of keeping up with inflation. You (or your heirs) can leave at any time, recovering the lesser of your unrecovered costs or the current value of your fund shares. So if you leave or die after a bull market, you will be leaving money on the table. The amounts set aside benefit participants who live long and stay put. The actuaries who helped Purpose design the product calculated that these returns should add 1.5 percentage points or more to the annual return of the portfolios.

ILLUSTRATION BY PATRICK WELSH FOR FORBESHOW TO PLAY IT

By William Baldwin

One of the unlikely holdings of an early Purpose equity fund was a small stake in management company Purpose, which grew 50x by the time it was cashed in. Alas, you cannot buy today. Stick to shares of Artisan Partners Asset Management, Franklin Resources, Invesco, T. Rowe Price Group or WisdomTree. Enterprise values ​​(market capitalization plus debt minus cash) represent between 1.3% and 2% of assets under management. The industry is experiencing a painful flight of clients from active portfolios to cheap index funds, but this is offset by low price-earnings ratios. All in all, fair price bets on a rising stock market.

William Baldwin is a Forbes Investment Strategies columnist.

The annuity industry is dominated by insurance companies, which offer fixed payments for life, around $7,000 per year for a 65-year-old man who invests $100,000. But insurers do not allow buyers to change their minds once the purchase has been made.

Competing with a traditional mutual fund, Purpose Longevity offers retirees this mortality-focused yield enhancement. In competition with fixed annuities, Longevity offers some hope of a rising payout as well as the unusual surrender option. Seif doesn’t expect many shoppers to want out, but it does happen; a cash out was recently paid to a client who received a grim prognosis from his doctor.

Mainly confined to the small domestic market for now, Seif has done quite well. Purpose was worth $700 million at its last valuation. It brought in outside capital, including $60 million from German insurer Allianz, to fund the expansion, but managed to retain more than a quarter of the equity.

Purpose could really go a long way if it followed Royal Bank’s lead by invading the US market. When will mere mortals south of the border be able to get their hands on a longevity fund? Seif hints that something is afoot but cannot divulge his plans. As for crypto funds: Fidelity Investments allows trading in Canadian ETFs, but most US investors have to pray that SEC regulators will eventually open their ears.

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