French fund manager Melanion Capital launches EU-regulated ETF that tracks Bitcoin price, the Bitcoin-tracking fund fully complies with the European Union’s UCITS standards.
Melanion Capital, a Paris-based derivatives fund manager, has established a new EU-regulated fund that intends to track the price of Bitcoin with a correlation of up to 90%.
The fund is the first of its kind to be issued under the European Union’s UCITS umbrella – an acronym for “undertakings for the collective investment in transferable securities.”
UCITS-compliant funds account for roughly 75% of all collective investments by small investors in Europe, according to European Commission data.
UCITS establishes a framework for regulation at the European level, rather than at the national level, and imposes stringent requirements on fund managers.
Melanion Capital’s Melanion BTC Equities Universe UCITS ETF uses a beta weighting mechanism to “bridge the gap” between equities and Bitcoin.
As a result, it tracks a basket of up to 30 equities in crypto mining and blockchain development, which Melanonion claims have a 90 percent correlation to the price of bitcoin.
Melanion Capital’s Head of ETF, Cyril Sabbagh, has promoted the product as a way for investors to obtain exposure to Bitcoin while avoiding risks such as loss or piracy:
“By investing in equities replicating the Bitcoin performance, investors can achieve diversified asset allocation that was not available before. Given Bitcoin’s absence of correlation to traditional assets and the ETF’s UCITS character, allocators should certainly be interested.”
Melanion CEO Jad Comair told reporters that getting the fund approved by France’s Autorité des marchés financiers [AMF] was “a real challenge because of the sensibilities and politics currently surrounding Bitcoin and Bitcoin investing.”
As previously reported, there are a plethora of Bitcoin exchange-traded products (ETPs) listed in Europe, but none of them is UCITS-compliant.
The top 10 holdings in Melanion’s ETF’s “Melanion Bitcoin Exposure Index” include currently Marathon Patent, Riot Blockchain, HIVE Blockchain, Argo Blockchain, Hut 8 Mining, and other equities from segments such as crypto banking services and crypto asset management and trading.
The index constituents are weighted according to the beta coefficient against Bitcoin, which is “capped based on liquidity, and rebalanced and rebuilt quarterly,” according to Melanion.
The ETF will first be listed on Euronext in Paris and will incur a management fee of 0.75 percent.
Despite the fact that more investment vehicles are targeting the digital asset sector, regulatory approval for a Bitcoin ETF remains a risky prospect in several jurisdictions, including the United States, Greg King, CEO of Osprey Funds, recently made the case that the consistently high number of Bitcoin ETF applications in the United States earlier this year – despite U.S. regulators’ longstanding reluctance –