Asset manager, index provider, and exchange-traded fund (ETF) issuer Reality Shares has unveiled China’s first blockchain ETF, which will give investors access to companies based in the mainland.
The Reality Shares Nasdaq NexGen Economy China ETF (ticker BCNA) tracks the Reality Shares Nasdaq Blockchain China Index, which seeks to identify and invest in Chinese companies focused on developing and utilizing blockchain technology. BCNA has launched with 31 holdings and will be rebalanced twice a year.
Reality Shares CEO Eric Ervin said:
“China is quickly becoming a global epicenter for blockchain innovation. In 2017, the nation filed for more blockchain-related patents than any other country in the world, and the Chinese government recently endorsed blockchain technology as an economic ‘breakthrough.’ China’s blockchain industry presents an incredibly exciting and long-term investment opportunity, and through BCNA, investors can now easily access this emergent market.”
According to the company, BCNA evaluates businesses on seven key criteria, particularly their role in the blockchain ecosystem, blockchain product state, and membership in the Blockchain Institute. It encourages business to aim for a high score in the above-mentioned categories to qualify for inclusion in BCNA.
Reality Shares claims that its system uses a series of quantitative factors that are patterned to “pinpoint and evaluate the highest-scoring companies” in the blockchain space.
China was chosen for the blockchain ETF because of its strong economy and the immense wealth of its investors. More importantly, the Asian country has characteristics that make it attractive to many investors, including private equity ratio, the size of its equity market, strong credit quality, and historical non-correlation to the US market.
The company added:
“Today Chinese companies represent some of the largest proponents of blockchain technology and have committed vast material resources to develop, researching, supporting, innovating, and utilizing blockchain technology. Blockchain-related investments in China can span the infrastructure, financial services, manufacturing, and technology industries, and offer the potential for outperformance as well as improving the world.”
In May, Ervin discussed why choosing the right name was the most important step for a blockchain ETF.
“There’s a rule where basically 80% of the fund has to be invested in what the name of the fund is. So, if you call your fund an international ETF, then 80 % of the fund has to be in international names.”