Multiple direct custody Ether ETFs coming to market

April 16, 2021 | Last updated on April 16, 2021
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This story was updated to reflect that Evolve and CI Global Asset Management have temporarily waived the management fees of the ETFs described below.

Three companies are going head-to-head, with each firm launching a direct custody ether ETF on April 20.

Purpose Investments is launching the Purpose Ether ETF, Evolve is introducing ETHR and CI Global Asset Management (CI GAM) is bringing the CI Galaxy Ethereum ETF to market — all the funds will trade on the TSX and provide direct exposure to Ether, the second-largest cryptocurrency by market capitalization after Bitcoin.

The Purpose fund has a management fee of 1%; the Evolve fund, 0.75% (on April 17, this fee was temporarily waived until May 31); and the CI fund, 0.4% — “the lowest management fee of any Ether ETF globally,” CI said in a release (on April 20, CI announced it was temporarily waiving this fee until June 15).

For its part, the Purpose fund will invest directly in physically settled Ether tokens and will have three classes: Canadian-dollar hedged (ETHH), Canadian dollar non-currency hedged (ETHH.B), and U.S.-dollar units (ETHH.U).

By owning the ETF instead of the cryptocurrency itself, the Purpose release said, investors can avoid “the associated risk of self-custody within a digital wallet.”

Purpose Investments will manage the fund, while Toronto-based Ether Capital Corp. will act as special consultant on issues such as Ether custody and liquidity. Ether holdings will be handled by New York–based Gemini Trust Company and CIBC Mellon Global Securities Services Company — the same process as for Purpose Investments’ direct custody Bitcoin ETF, which has attracted more than $1.4 billion in assets since its February launch.

The Purpose release said the ETF’s daily NAV will be priced based on the daily spot price of the TradeBlock ETX Index.

“While Bitcoin tends to get a lot of attention as it was the first major cryptocurrency, what Ether and the Ethereum ecosystem represent is one of the most exciting new technology visions today in society,” said Som Seif, founder and CEO of Purpose Investments, in the release.

Evolve said in a release that its fund will offer “exposure to the daily price movements of the U.S.-dollar price of Ether by utilizing the benefits of the creation and redemption processes offered by the exchange-traded fund structure.”

The Evolve fund will be offered in both Canadian-dollar unhedged units and U.S.-dollar unhedged units, and it won’t use derivatives or futures contracts, the release said. Further, it will use Gemini Trust Company as a subcustodian.

As for daily NAV, that “will be calculated based on the CME CF Ether-Dollar Reference Rate,” a once-a-day benchmark index price designed for Ether denominated in U.S. dollars.

“Similar to Bitcoin, investors will now be able to trade Ether as simpl[y] as buying shares through their bank or brokerage. ETHR will provide daily liquidity, transparency and security through a regulated ETF structure,” said Raj Lala, president and CEO of Evolve.

The CI Ether fund will also come in two classes: Canadian-dollar unhedged and in U.S. dollars, the CI release said. It added that the fund was designed “to provide investors with a convenient and expedient way to gain exposure to Ether through an institutional-quality fund platform.”

The CI fund’s holdings will be priced via the Bloomberg Galaxy Ethereum Index, owned and administered by Bloomberg Index Services Ltd.

CI GAM will manage the fund, and Galaxy Digital Asset Management, an affiliate of New York–based Galaxy Digital Holdings Ltd., will act as subadvisor.

This will be CI’s third cryptocurrency offering. According to Kurt MacAlpine, CEO of CI Financial, the parent company of CI GAM, this product launch is “CI’s latest step in building an industry-leading suite of cryptocurrency mandates that allow investors to gain exposure to this exciting, growing asset class through an accessible and secure structure at a very reasonable cost.”

These three launches come amid a flurry of activity in the Ether space, with companies such as Toronto-based 3iQ Corp. also having filed preliminary prospectuses for an Ether ETF.

Overall, interest has piqued in cryptocurrency funds at large, with multiple funds coming to market since spring of last year.