Morgan Creek, a capital management company that oversees more than $1.5 billion in assets, has partnered with Bitwise Asset Management to create the Digital Asset Index Fund.
The new cryptocurrency asset fund is the latest in Bitwise’s suite of cryptocurrency investment offerings, as the asset management company already owns the HOLD 10 Index Fund. It also aspires to launch a cryptocurrency ETF in the near future.
As with the HOLD 10 Index Fund, this index takes aim at institutional investors looking to enter the digital asset market. According to its website, the Digital Asset Index Fund “securely tracks the largest investible digital assets and provides approximately 75% coverage of total digital asset market capitalization. The index will weight the majority of its portfolio on bitcoin, with ether receiving the second largest allocation.
“The fund tracks the Morgan Creek Bitwise Digital Asset Index, overseen by an advisory committee comprised of the experts behind Morgan Creek’s asset allocation and Bitwise’s comprehensive, rules-based digital asset index methodology,” the website states.
One of the fund’s most notable advisors is Anthony Pompliano, who has worked for Morgan Creek since his crypto-focused venture capital firm Full Tilt Capital was acquired by the investment house in Q1 2018. In addition to Pompliano, Morgan Creek CEO Mark Yusko and Bitwise global head of research Matt Hougan also sit on a committee specifically assembled to oversee the fund’s overall direction.
Like Bitwise’s HOLD 10 Index Fund before it, the Digital Asset Index Fund rebalances monthly and holds a weighted portion of several different cryptocurrencies. Along with bitcoin and ether, the fund will include bitcoin cash, EOS, litecoin, ethereum classic, zcash, monero, dash and OMG. The fund will also look to conduct annual audits to bolster the funds security.
Notably, due to the fund’s selection process, coins like Ripple’s XRP and Stellar’s lumen were intentionally left out. Explaining the fund’s rationale to Forbes, Pompliano said it excluded a coin if “a central party … owns 30% or more of supply,” believing this “introduces a lot of additional risk that may not be there if it was a more decentralized network.”
In addition to XRP and lumen, IOTA and Cardano were also excluded from the index for not meeting Bitwise’s cold-storage custody requirements.
Even without these additions, the two firms feel confident about the new index. “We’re fully prepared and feel we’ve built something that institutional investors will find attractive regardless of how the assets are categorized,” Pompliano told Forbes. “Whether they’re securities or not.”
Morgan Creek and Bitwise’s joint fund continues a movement that has looked to create a secure investing environment for institutional players looking to enter the market. Coinbase, for example, established its own crypto index fund and custody service in an attempt to quell the anxieties of institutional and accredited investors, who are often repelled from investing in the industry over concerns regarding fund security, asset management and technological learning curves.
Michael is passionate about the rise of Bitcoin and the downfall of the largest fiscal experiment in human history. You can follow him on Twitter @taiberg.