A new fund aims to give Bitcoin exposure without investors having to buy the digital currency directly. Photo / File
A new fund aims to give Bitcoin exposure without investors having to buy the digital currency directly. Photo / File
A new fund which will offer Kiwi investors Bitcoin exposure without having to buy digital currencies directly comes with a risk-rating at the top of the scale and a warning that it is a highly speculative investment.
The Vault International Bitcoin Fund has been issued by Wellington fund manager ImplementedInvestment Solutions and will be managed by Vault Digital Funds - a new company majority owned by Janine Grainger, the founder of crypto exchange Easy Crypto. Its other shareholder is Vinnie Gardiner who is chief executive of the company.
Investors can buy units in the fund which pools the money with other investors and invests it into listed bitcoin funds and exchange-traded Bitcoin funds.
Gardiner said he wanted to set up a fund that made it easier for people to invest in digital currencies after finding it was not always that easy himself as an investor.
"I've been in it for a while so I have seen the highs and the lows and experienced various things. I had assets in Cryptopia when that got hacked.
"My brother lost his phone with all his digital wallets passwords down a foundation hole just last week, so these are real life examples. What I also see is people are a bit mystified as to what is going on and how do I download a digital wallet and what are the risks of being on an exchange?"
Gardiner said he wanted the new fund to be simple, smart and trustworthy.
"You are buying units in a fund not Bitcoin directly."
The fund is structured as a PIE which means investors' tax rate for income earned from the fund is capped at 28 per cent.
However because the fund will invest in foreign listed funds and ETFs it will be taxed under the fair dividend rate model which means investors pay tax on an annual 5 per cent "deemed" dividend income at their Prescribed Investor Rate.
Gardiner said the fund was a registered managed investment scheme while the underlying funds were listed on regulated exchanges. Bitcoin itself is unregulated.
"People are far more conversant with that style of investing rather than downloading a digital wallet or an exchange - all of which has risk."
Vinnie Gardiner, chief executive and co-founder of Vault Digital Funds. Photo / Supplied
Investors will need a minimum of $1000 to invest but it will also be on retail platform Investnow which likely bring the minimum down to a $250 lump sum or $50 regular payment.
Easy Crypto will also launch the fund on its site in the future. The fund comes with a hefty annual fee of 2.5 per cent of funds under management.
Gardiner said the investment would be "highly volatile" given the volatile nature of Bitcoin itself.
"We will be closely tracking the price of Bitcoin. It will be incredibly volatile. People need to go in knowing it is incredibly volatile."
The fund will be able to invest in the Grayscale Bitcoin Trust, CI Galaxy Bitcoin ETF, 3IQ Coinshares Bitcoin ETF and Purpose Bitcoin ETF.
Gardiner said the ETFs were mainly listed on the Toronto stock exchange in Canada.
Gardiner said Grayscale Bitcoin Trust was on the fund's radar as well although he admitted there were issues with Grayscale itself.
Grayscale calls itself the world's largest digital-currency asset manager. According to the Wall Street Journal it launched a fund two months ago that invests in tokens tied to crypto-trading platforms including Uniswap and SushiSwap.
US regulator the Securities and Exchange Commission is investigating the startup behind Uniswap.
Earlier this year Grayscale dissolved a fund created to invest in the cryptocurrency XRP and returned cash to investors after the SEC sued the company behind that digital asset.
Gardiner said there were 11 Bitcoin ETFs before the SEC at the moment.
"It is still a relatively small industry. It is certainly on the radar of regulators and a lot of the large investment firms are seeking to get in."
The Vault fund has around $1million invested in it so far, largely seeded by Grainger and Gardiner.
Gardiner believes it will attract investors who are curious about Bitcoin but haven't taken the plunge yet.
"There is no exact demographic that we are looking at. Part of the reasoning for the minimum is to make sure people go in and deep dive and do their research before come to the fund."
He said investors should get financial advice before taking the leap.
