Morgan Creek Digital and Bitwise Asset Management have launched a Digital Assets Index Fund aimed at endowments, foundations, pensions, wealthy families, and sovereign wealth funds to provide them with the means to invest in a basket of 10 cryptos.
“Increasingly, institutional investors are coming to us asking for exposure to the space,” Mark Yusko, CIO at Morgan Creek, said. “We wanted to create a vehicle tailored for those investors.”
The fund has a minimum requirement of $50,000 and is limited to accredited investors, with bitcoin having nearly 70% of the index’s share, followed by ethereum at 15.4% and Bitcoin Cash at 5.5%.
The only token included is OmiseGo at 0.2%, with the fund stating they have “rigorous, rules-based eligibility requirements including custody qualifications, trade concentration limits and pre-mine restrictions to qualify for inclusion.”
Ripple is not included due to concerns over its significant concentration in the ownership of XRPs, with Morgan Creek Digital partner Anthony Pompliano stating:
“If there’s a central party that owns 30% or more of supply then we withhold those from the index because we think that introduces a lot of additional risk that may not be there if it was a more decentralized network.”
Mark Yusko, the current CEO of Morgan Creek who previously managed a University endowment fund, has joined the index fund’s policy committee with Pompliano stating:
“Institutional investors are seeing the market pullback as an opportunity [to] start building exposure to the space, and have been pushing us to get this fund to market quickly.”
BitWise Investments has its own crypto index fund which holds 10 cryptos that they say has historically outperformed just holding bitcoin.
With the new product by Morgan Creek, which has around $1.5 billion under management, seemingly targeted at institutional investors who might want to diversify their portfolio.
While studies are still trying to establish the various price qualities of cryptos in general and bitcoin specifically, a consensus of sorts has seemingly been formed that cryptocurrencies do not correlate with other assets after a number of studies made the same finding.
That lack of correlation makes it very useful for diversification, with one study finding that a portfolio which replaces gold with bitcoin outperforms, even when accounting for risk.
Yet more specific features than lack of correlation have not yet quite been established in scholarly research, but a number of studies have replicated findings which show a portfolio with bitcoin or cryptos outperforms one without.
That’s in line with general diversification portfolio theory which is useful for reducing risk while seeing higher returns, so interest by institutional investors, including university endowment funds and pension funds, has been growing.