When you’re the irrepressible chairman in a developing industry, you usually have 2 functions: A) Stay in your lane and let other firms pop up to solve the industry’s issues, or B) Try to offer as many goods as possible and own the entire client experience from A-Z (no Amazon pun intended).
If you have any problems with choosing which function Coinbase is gunning for, that’s now gone. The digital currency giant just declared they’re extending in yet another course by launching a inactively managed cryptocurrency index fund.
The fund will have a $10,000 minimum and charge a 2% yearly management fee with no performance fee, which is rare for most traditional investment funds, but fortunately is becoming the norm for crypto-specific inactive investment vehicles.
The Index Fund is the first investment tool from Coinbase’s new asset management division. It will include all cryptocurrencies 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 deliver changes (cause different currencies have different inflation aims).
Herewith, Coinbase plans to suggest future investment vehicles that aren’t restricted to what is listed on GDAX — but for now it’s the best method to ensure that there is enough liquidity to purchase the original assets.
From the point of view of productivity, 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 cryptocurrencies, as long as an investor can meet the $10,000 minimum investment. For this fund investors will also have to be commissioned and U.S-based, although Coinbase hopes to remove those limitations for future funds. New investment can be made once a month, with atonement happening on a quarterly basis with no lockup period.
All the funds will be held by Coinbase in cold storage, which is definitely an advantage considering their experience managing such high-value assets. Actually, their security is so honorable that they have another good called Coinbase Custody, which offers cold storage and custody services for other investment funds.
Indeed, Coinbase is not the first to develop a passive crypto fund. Some are making similar SEC-sanctioned funds like Bitwise investments’ HOLD 10 index,
and others are taking a platform step like Iconomi’s service that lets investors make their own custom-weighted crypto asset basket. However, the main 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.