Purpose Investments, which also introduced the first ETF in North America created to track the price of bitcoin in February, launched new ETFs today,
The Canadian-dollar-denominated ETF non-currency hedged units of the ETFs began trading on the Toronto Stock Exchange today under the tickers: BTCY.B (Purpose Bitcoin Yield ETF) and ETHY.B (Purpose Ether Yield ETF).
The key difference between the new bitcoin and ethereum ETFs and the ones that began trading earlier this year is these pay investors a monthly yield. This is done through a derivatives-based covered call strategy, which Purpose Investments says is the first of its kind in the crypto space.
Purpose Investment says it can’t guarantee the payout amount due to volatility, but expects an annual yield of between eight and ten per cent for both ETFs, and is classified as income in non-registered accounts. The management fee for both is 1.10 per cent.
Less volatile way to play crypto
Like pure-play cryptocurrency ETFs, this strategy will expose investors to the ups and downs of the price of the underlying digital asset. But the monthly payouts mean there’s a tradeoff, which is that capital gains upside is limited in comparison.
It also means capital losses will be smaller and there will be less volatility. Vlad Tasevski, chief operating officer and head of product at Purpose Investments, says investors could consider these ETFs if they want exposure to the asset class without the swings associated with crypto markets.
“They should also consider if they want to earn yield while they hold them. Covered call options allow investors to generate additional short-term income on an asset they believe has long-term potential,” he told Yahoo Finance Canada.
“Given the connection between the volatility of the underlying asset and premiums, covered call strategies on cryptocurrencies offer unique exposure to a unique asset class, providing investors a high yield without sacrificing significant price participation.”
A third fund called the Purpose Crypto Opportunities ETF also began trading today. Canadian-dollar-denominated ETF non-currency hedged units, and U.S.-dollar-denominated ETF non-currency hedged units begin trading today under the tickers: CRYP, CRYP.B, and CRYP.U.
Purpose says it uses an actively managed approach targeting long-term capital appreciation primarily through digital assets and securities that provide direct and/or indirect exposure to digital assets. The management fee is 1.25 per cent.
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.