Invesco is launching an innovative ETF (exchange traded fund) designed to target companies with potential to generate real earnings from blockchain technology.
The Invesco Elwood Global Blockchain UCITS ETF has been developed in partnership with Elwood Asset Management (Elwood), an investment firm specialising in providing institutional investors with exposure to digital assets and blockchain technology.
Gary Buxton, Head of EMEA ETFs at Invesco, says: “Invesco has earned a reputation for being able to identify genuine opportunities with sound investment potential, and finding the most suitable ways to bring them to market. We believe the potential for blockchain technology to disrupt the status quo of companies in virtually every industry makes for a strong long-term investment case. This new fund offers exposure with the added benefit of Elwood’s expertise along with the attractions of our ETF structure.”
Bin Ren, CEO of Elwood, says: “Blockchain has been around for a decade, but many people still see it just as the technology behind cryptocurrencies. The true potential, however, may extend far beyond that. We are beginning to see the technology being used by financial services companies in particular, but we expect greater application of blockchain technology across a wide range of industries. We believe the potential for blockchain to change the global economy is greatly underappreciated in today’s market, much like the internet was in the beginning, when most people couldn’t see past its usefulness for email.”
A blockchain is a ledger that enables the transfer of assets to create a transparent, unalterable, traceable and permanent record of all transactions involving those particular assets. Cryptocurrencies were the first assets to use the blockchain technology, but assets can also be physical, or they could be medical records, legal contracts or any other information that flows between multiple parties.
Chris Mellor, Head of EMEA ETF Equity Product Management at Invesco, says: “The potential for blockchain to drive real earnings is huge, but it is often hidden within companies involved in other areas. This ETF offers investors access to companies with real earnings now, but with the added potential of blockchain-related earnings not reflected in their share prices.”
The ETF aims to deliver the performance of the Elwood Blockchain Global Equity Index by physically investing in the index constituents. The index offers exposure to global companies in developed and emerging markets that participate or have the potential to participate in the blockchain ecosystem. It is designed to evolve with the potential growth of blockchain technology.
Kevin Beardsley, Head of Business Development at Elwood, says: “The majority of the index is currently allocated to companies where the value attributable specifically to blockchain technology is either in the ‘developing’ or ‘potential’ phase. These are companies with assets that are well-positioned to capitalise on the emerging opportunities for blockchain. Over time, however, we would expect the balance to shift naturally to companies with more significant direct exposure to blockchain-related earnings as the technology becomes more ubiquitous.”
In terms of the largest sector allocations, the index currently has 46 per cent in information technology, 23 per cent in financials, 9 per cent in communication services and 8 per cent in both the materials and consumer discretionary sectors. The three largest geographical allocations are to the US (39 per cent), Japan (29 per cent) and Taiwan (12 per cent).
The index is calculated for Elwood Asset Management by Solactive AG, a globally recognised index provider with expertise in tailor-made indices. The index is reviewed and rebalanced quarterly.