When you’re the runaway leader in a growing industry you typically have two opinions: A) Stay in your lane and let other companies pop up to solve the industry’s problems. B) Try to offer as many products as possible and own the entire customer experience from A-Z (no Amazon pun intended).
If there’s any doubt which option Coinbase is gunning for, that’s now gone. The digital currency giant just announced they’re expanding in yet another direction by launching a passively-managed cryptocurrency index fund.
The fund will have a $10K minimum and charge a 2% annual management fee with no performance fee, which is rare for most traditional investment funds but luckily is becoming the norm for crypto-specific passive investment vehicles.
The Index Fund is the first investment vehicle from Coinbase’s new asset management division. It will include all digital currencies that trade on GDAX, weighted by market cap. This means at launch it will be comprised of 62% Bitcoin, 27% Ethereum, 7% Bitcoin Cash and 4% Litecoin. This will rebalance whenever a new asset is added to GDAX as well as once a year to account for supply changes (as different currencies have different inflation targets).
That being said, Coinbase does plan on offering future investment vehicles that aren’t limited to what is listed on GDAX – but for now its the best way to insure that there is sufficient liquidity to acquire the initial assets.
In terms of performance, the fund backdates to early 2015 when GDAX was launched. Since then it’s shown (predictably) insane returns, up about 49x or 4,900%.
Investments can be made in USD or any of the included digital currencies, as long as an investor can meet the $10,000 minimum investment. For this fund investors will also have to be accredited and U.S-based, although Coinbase hopes to remove those restrictions for future funds. New investment can be made once a month, and redemptions happening on a quarterly basis with no lockup period.
All funds will be held by Coinbase in cold storage, which is certainly a plus considering their experience managing such high value assets. In fact their security is respected that they have another product called Coinbase Custody, which offers cold storage and custody services for other investment funds.
Of course Coinbase isn’t the first to develop a passive crypto fund. Some are creating similar SEC-sanctioned funds like Bitwise investments’ HOLD 10 index, and others are taking a platform approach like Iconomi’s service that lets investors create their own custom-weighted crypto asset basket. But the major differentiator here is that Coinbase is already such an established name in the field with so many existing investors already using at least one of Coinbase’s services.
The fund will launch in a few months, and accredited investors can sign up now.