Hard-to-access blockchain industry captured by ETF

Invesco is to launch an exchange traded fund (ETF) that will gain exposure to blockchain by physically investing in businesses that will benefit from the technology, such as financial services companies.

The firm’s Invesco Elwood Global Blockchain Ucits ETF will gain exposure initially to firms that are set to increase their real earnings from the use of blockchain, primarily IT companies and financial firms.

Direct access to blockchain firms is difficult, with many at the start-up phase and not publicly investable.

The ETF has been developed with Elwood Asset Management, an investment firm specialising in providing institutional investors with exposure to digital assets and blockchain technology.

It tracks the Elwood Blockchain Global Equity Index, which offers exposure to global companies in developed and emerging markets that participate or have the potential to participate in the blockchain ecosystem.

In terms of the largest sector allocations, the index currently has 46% in information technology, 23% in financials, 9% in communication services and 8% in both the materials and consumer discretionary sectors.

Chris Mellor, regional head of ETF equity product management at Invesco, said: “The potential for blockchain to drive real earnings is huge, but it is often hidden within companies involved in other areas. This ETF offers investors access to companies with real earnings now, but with the added potential of blockchain-related earnings not reflected in their share prices.”

Invesco explains the technology as a ledger that enables the transfer of assets to create a transparent, unalterable, traceable and permanent record of all transactions involving those assets.

Cryptocurrencies were the first assets to use the blockchain technology, but assets can also be physical, or they could be medical records, legal contracts or any other information that flows between multiple parties.  

Bin Ren, chief executive of Elwood, said: “Blockchain has been around for a decade, but many people still see it just as the technology behind cryptocurrencies. The true potential, however, may extend far beyond that. We are beginning to see the technology being used by financial services companies in particular but we expect greater application of blockchain technology across a wide range of industries.

He added: “We believe the potential for blockchain to change the global economy is greatly underappreciated in today’s market, much like the internet was in the beginning, when most people couldn’t see past its usefulness for email.”

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