Ark Bitcoin ETF Disclosure Reveals Expected Fee of 0.95%

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Cathie Wood’s Ark Invest has set the bar for bitcoin ETF fees, analysts say, after becoming the first asset manager to reveal fees for its proposed bitcoin ETF.

The manager plans to launch a fund that will own and monitor the performance of bitcoin, according to a disclosure filed with the Securities and Exchange Commission.

The Ark 21Shares Bitcoin ETF will track the performance of bitcoin in US dollars, as measured by the performance of the S&P bitcoin index, according to the filing. The ETF trust will also hold bitcoin and trade on the Cboe BZX exchange, according to the filing.

So far, at least 11 other stores have announced plans to launch crypto ETFs, including Fidelity, First Trust and WisdomTree. The SEC has yet to approve any bitcoin ETFs.

This article was previously published by Ignites, a title owned by the FT group.

Ark’s disclosure reveals that the proposed ETF will pay the sponsor, Switzerland-based exchange traded product provider 21Shares, a unified fee of 95 basis points. 21Shares will pay all operating costs out of these costs.

The ETF’s expense ratio would likely match the sponsor expense, analysts said.

Wood is an investor and board member of cryptocurrency platform Amun Holdings, which is the parent company of 21Shares.

“Since any approved product would provide the same commodity exposure as others, the brand and costs of the asset manager will matter more than with an equity or fixed income ETF,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA Research.

If Ark’s Bitcoin ETF is approved, the New York-based manager’s $ 24 billion Innovation ETF and Internet Next Generation ETF will be its largest shareholders, said Neena Mishra, director of ETF research at Zacks. Investment Research.

Both ETFs already own shares of Coinbase, according to daily fund disclosures. The Internet Next Generation ETF is also an investor in Grayscale’s Bitcoin Trust.

As a result, investors in Internet Innovation and Next Generation ETFs would gain exposure to the future Bitcoin ETF without being charged, which would further increase the popularity of the funds, she said.

The Innovation ETF, Ark’s flagship ETF, generated $ 15.4 billion in net inflows in the fiscal year ended May 31, according to FactSet, while the Internet Next Generation ETF attracted 3 , $ 8 billion over the same period.

“Since [Ark’s proposed ETF] already has a big market, others will want to match or reduce its expense ratio, triggering a cost war in space, ”Mishra said.

Canada’s Bitcoin ETFs suffered a similar race to the bottom, she noted.

The $ 756 million Purpose Bitcoin ETF launched in February with an expense ratio of 100 basis points. The $ 73 million Bitcoin ETF, which was launched a day later, reduced its fees by 25 basis points, to 75 basis points. Meanwhile, Canada’s third bitcoin ETF, the $ 186 million CI Galaxy Bitcoin ETF, launched in March and charges 40 basis points.

In the United States, the first bitcoin ETF to launch would likely catch most of the new flows, Mishra said. If all bitcoin ETFs were launched on the same day, the cheapest would sell the most, she added.

Bitcoin ETFs would incur higher fees than stock or gold ETFs due to the cost of custody, she explained.

Ark has chosen Coinbase as the custodian of its Bitcoin ETF, according to the filing. Valkyrie Digital Assets has also selected Coinbase as the custodian of its next bitcoin fund, according to information filed in January.

The cryptocurrency exchange’s share price rose 8.3% on June 28, to $ 246.69, following news of its collaboration with Ark on the ETF. Coinbase debuted on the Nasdaq in April.

Bitcoin can be held across multiple wallets, with the custodian implementing cold storage or using multiple private keys and audit trails to protect assets, the filing noted.

The shortage of market-tested cryptocurrency custodians could prevent the SEC from approving a bitcoin ETF, analysts told Ignites in March. However, that could change as more custodians put in place security measures to ensure assets are protected, said Brian Mosoff, chief executive of Ether Capital, in March.

BNY Mellon, for example, announced in February that it would begin offering digital asset custody and administration services.

In March, the SEC warned custodians of digital assets that they should make sure those assets are safe. The regulator’s examinations division also plans to verify whether market players who manage digital assets can ensure that client assets are protected from hackers.

* Ignites is a news service published by FT Specialist for professionals working in the asset management industry. It covers everything from new product launches to regulations and industry trends. Trials and subscriptions are available at ignites.com.

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