A $250 million asset manager wants to list a new fund that'll track the development of blockchain in China
- Reality Shares, the company behind one of the first exchange-traded funds offering exposure to blockchain technology, is trying to get another ETF approved.
- The new fund aims to track the growth of blockchain technology in China.
The company behind one of the first blockchain exchange-traded funds is looking to list another blockchain-focused fund on the Nasdaq Stock Market, a person familiar with the matter told Business Insider.
California-based asset manager Reality Shares made headlines at the beginning of the year when it launched its blockchain fund, the Reality Shares Nasdaq NexGen Economy ETF. Now, the company, which manages $250 million, is trying to get clearance from regulators on a new blockchain fund that'll track companies based in China and Hong Kong that are working with blockchain, the technology behind cryptocurrencies such as bitcoin.
At this point, it is not clear what the fund's fees will be. The fund was "designed to measure the returns of companies that are committing material resources to developing, researching, supporting, innovating, or utilizing blockchain technology."
China notably cracked down on cryptocurrencies in 2017, but the country has been supportive of blockchain innovation, experts have told Business Insider. Sebastian Quinn-Watson of Blockchain Global, for instance, says the market for blockchain in China is developing quickly.
"Developers, founders, corporates, universities are all clamoring to build on, understand and develop use cases for blockchain," Quinn-Watson said.
Notably, Pony Ma, the CEO of Tencent Holdings, said the tech giant is looking into blockchain technology, as reported by Coindesk. Also, China-based Sinochem recently completed its first gasoline shipment using the blockchain.
The popularity of Reality Shares original blockchain fund, which ballooned to over $100 million just 10 days after launch, caught the attention of Wall Street observers. Some market watchers are skeptical about whether such a fund is a solid investment.
For instance, UBS said in a note out to clients in January that blockchain is too nascent a technology to properly capture in a fund.
"What we believe is important to consider when investing in a fund targeting an emerging industry is that, often times, pure-plays do not exist," the bank said.
Since pure-play, publicly-traded blockchain companies that are fully built around and focused on the new technology don't really exist (yet), funds attempting to offer exposure to the space will invest in companies that are to some degree integrating blockchain into their infrastructure, even if their core businesses lie elsewhere.
For example, Overstock, one of the companies included in Reality Shares blockchain ETF, has a venture arm - Medici Ventures - that invests in blockchain startups, but its main business is in e-commerce. The problem, according to UBS, is that blockchain won't have a meaningful impact on those businesses in the near-term.
In fact, Overstock's Medici Ventures reported a loss of $22 million for 2017, the Wall Street Journal's Paul Vigna reported.