- The first Bitcoin mutual fund, the Bitcoin Strategy ProFund, launched in late July.
- Manager Simeon Hyman explains that the fund is buying front-month Bitcoin futures.
- Hyman explains his approach, and the selling points of a Bitcoin mutual fund.
Bitcoin is growing up, putting on a tie, and going to work at a mutual fund.
In the latest milestone for the 12-year-old cryptocurrency, there is now a mutual fund that invests in bitcoin.
ProFunds, an affiliate of ETF provider ProShares, launched its Bitcoin Strategy ProFund in late July. The fund has a $1,000 minimum investment and is managed by Simeon Hyman.
In an exclusive interview with Insider, Hyman said the fund will invest solely in front-month bitcoin futures instead of buying the coin itself. He says that the futures contracts have historically had a high correlation with spot bitcoin prices, as well as similar volatility and beta, but are a better-regulated investment that will give investors more confidence in what they’re buying.
“The key here is that you’ve got the CME and the CFTC that are governing and regulating the futures market as well as a central clearinghouse which makes sure everyone has their margin and collateral and everything else. That’s not there in the bitcoin spot market,” he said.
That security comes with some tradeoffs, as taxes and fees mean the performance of the Bitcoin Strategy ProFund won’t precisely track the performance of bitcoin itself, or the coin’s futures.
But the regulatory aspect is certainty also part of Hyman’s case for buying a bitcoin mutual fund instead of setting up a digital wallet and buying the coin over an exchange, a process that might be unfamiliar to many potential investors. Then there are the periodic security concerns around some of those exchanges.
“I want exposure to the changing price of bitcoin. I don’t need to access bitcoin in the same way as someone who’s using it for one of its core attributes,” he said.
He adds that for an investor who wants exposure to bitcoin for its price or diversification but doesn’t need to take advantage of the features of the cryptocurrency itself, the fund could do the trick.
“The futures approach in a mutual fund will absolutely have an important audience out there who has found some of the ways to get exposure to date, a little bit cumbersome or unattractive for various reasons,” Hyman said. “There were definitely constituencies out there that didn’t see the legacy approaches as quite working for them.”
In that sense the mutual fund structure is almost a security blanket for those investors, and who will also be able to easily get their money in and out of the fund.
The mutual fund is only one part of a larger search for exposure to crypto without buying actual cryptocurrencies. Cryptocurrency exchange Coinbase went public in April, while JPMorgan just created an in-house bitcoin fund for private bank clients, according to CoinDesk.
Firms have been trying to launch bitcoin ETFs since 2017, but so far, none of them have been cleared by the Securities and Exchand Commission. Hyman says that ProFunds also has a bitcoin ETF in the works.