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You are an investor and you want to add some of these blockchain companies you’ve been hearing about to your portfolio. But you’ve also heard about initial coin offerings (ICOs) and would rather not go that route. What to do?
A new crop of structured portfolios and funds has hit the market, offering investors like you other ways to bet on the promise and potential profits of blockchain technology.
FOR MANY OF US, $50,000 MAY BE TOO MUCH TO INVEST IN SUCH A NARROW SECTOR. BUT WE MAY STILL WANT TO GRAB A PIECE OF THE ACTION BEFORE IT’S TOO LATE.
One of the latest is LPL Financial’s new “”
The LPL vehicle is a (SMA), a portfolio of hand-picked investments that is closely supervised by a professional manager. The management fee is five basis points of the portfolio. One basis point is equivalent to 0.01 percent.
Separately managed accounts are available only to individual investors, as defined by the Securities and Exchange Commission. The minimum investment in LPL’s SMA is $50,000.
The LPL blockchain investment portfolio aims to blend investments in sectors that might capture significant growth and profitability by realigning with blockchain. These sectors include energy, health care, industrials and real estate. The investments are based on LPL’s about emerging blockchain wins in “setting standards, developing infrastructure, and executing transactions.”
LPL is a Fort Mill, S.C.-based broker-dealer that provides investment research, trading and operational support to independent financial advisors across the country. LPL is by two private equity partners and is listed on the Nasdaq.
Of course, for many of us, $50,000 may be too much to invest in such a narrow sector. But we may still want to grab a piece of the action before it’s too late.
“Ignoring blockchain today is like ignoring the internet 30 years ago,” Jim Sinegal, a senior equity analyst with research firm Morningstar, at an investment conference. “You don’t want to make the same mistake with blockchain just because we’re in the early stages.”
But trying to buy common shares of big companies working on blockchain isn’t an effective way to make a concentrated bet on the technology, , director of ETF research for Chicago-based , tells ThirtyK.
“The problem is that big companies like Intel, Accenture and IBM that are investing heavily in blockchain are so big that blockchain is a small part of their overall business,” she says. “And then there are the pure plays” that must be highly vetted and managed, she adds, because so many startups claim to have a blockchain angle.
Her general recommendation is individual investors consider blockchain exchange-traded funds that blend traditional portfolio management and risk analysis with an emphasis on blockchain applications.
Here are two examples of what’s out there: Amplify offers , an actively managed ETF that is at least 80 percent composed of companies concentrating on developing and applying blockchain. Meanwhile, the tracks an index consisting of blockchain-related companies located in Hong Kong and mainland China.
It’s possible the nascent blockchain funds might deliver results similar to funds that focus on robotics, says Mishra, who did not comment directly on LPL’s SMA. Blockchain funds, new this year, have not had time to develop track records, but the robotic-focused funds “have done pretty well” in their three years, she says. “The other niche technology funds have been successful.”
Meanwhile, the usual investor advisories apply. “If investors decide to invest in the niche ETFs, they should be a small part of the portfolio,” Mishra says. “You should have only low cost ETFs that provide exposure to the larger market. These smaller ETFs may succeed or not, depending on your investing horizon and risk tolerance.”
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