Ark bitcoin ETF disclosure reveals planned fee of 0.95%

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Cathie Woods Ark Invest raised the bar on Bitcoin ETF fees, analysts say, after it became the first asset manager to announce a fee on its proposed Bitcoin ETF.

According to a disclosure filed with the Securities and Exchange Commission, the manager plans to set up a fund that will hold and track the performance of Bitcoin.

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, as the filing shows. The ETF trust will also hold Bitcoin and will trade on the Cboe BZX exchange as per the filing.

So far, at least 11 other shops have announced plans to launch crypto ETFs, including Fidelity, First Trust and WisdomTree. The SEC has not yet approved any Bitcoin ETFs.

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

Ark’s disclosure shows that the proposed ETF will pay the sponsor, Switzerland-based exchange-traded product provider 21Shares, a flat fee of 95 basis points. 21Shares bears all operating costs from this fee.

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

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

“Given that each approved product would provide the same exposure to the commodity as others, the brand and cost will be more important to asset managers than a stock or bond ETF,” said Todd Rosenbluth, head of the ETF and Mutual Fund Research at CFRA Research.

If the Bitcoin ETF is approved by Ark, the New York-based manager’s $ 24 billion innovation ETF and $ 6 billion Internet ETF will be its major shareholders, Neena Mishra said , Director of ETF Research at Zacks Investment Research.

Both ETFs already hold shares in Coinbase, as the funds’ daily disclosures show. The Next Generation Internet ETF is also an investor in Grayscale’s Bitcoin Trust.

As a result, investors in innovation and next generation internet ETFs would invest in the upcoming Bitcoin ETF without paying any fees, which would further increase the funds’ popularity, she said.

The Innovation ETF, Ark’s flagship ETF, recorded net inflows of $ 15.4 billion for the fiscal year ended May 31, while the next-generation Internet ETF reported $ 3.8 billion over the same period took.

“Since [Ark’s proposed ETF] already has a large market, others will want to match or undercut its expense ratio, which will trigger a fee war in this area, ”said Mishra.

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

Introduced in February, the purpose-built Bitcoin ETF valued at $ 756 million with an expense ratio of 100 bps. The $ 73 million Evolve Bitcoin ETF, launched a day later, cut its fees by 25 basis points to 75 basis points. Canada’s third bitcoin ETF, the $ 186 million CI Galaxy Bitcoin ETF, launched in March and costs 40 bps.

In the US, the first Bitcoin ETF to hit the market would likely attract the most new flows, Mishra said. If all bitcoin ETFs hit the market on the same day, the cheapest would be the bestsellers, she added.

Bitcoin ETFs would have higher fees than equity or gold ETFs because of the custody costs, she said.

Ark has selected Coinbase as the custodian for its Bitcoin ETF, the filing says. Valkyrie Digital Assets has also selected Coinbase as the custodian for its upcoming Bitcoin fund, according to the information submitted in January.

The cryptocurrency exchange’s share price rose 8.3 percent to $ 246.69 on June 28 after it was announced that it would partner with Ark on the ETF. Coinbase debuted on the Nasdaq in April.

Bitcoin could be stored across multiple wallets, with the custodian implementing cold storage or the use of multiple private keys and audit trails to protect assets, the filing said.

The lack of market-proven cryptocurrency custodians could deter the SEC from approving a Bitcoin ETF, analyst Ignites said in March. That could change, however, as more custodians take security measures to ensure assets are protected, Ether Capital CEO Brian Mosoff said in March.

For example, BNY Mellon announced in February that it would begin offering custody and management services for digital assets.

In March, the SEC warned digital asset custodians to ensure that those assets are safe. The regulator’s audit department also plans to examine whether market participants handling digital assets can ensure that customers’ assets are protected from hackers.

* Ignites is an FT Specialist news service for professionals in the wealth 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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