Reality Shares, a San Diego-based asset management firm, ETF issuer and index provider, announced its second blockchain-focused ETF, the Reality Shares Nasdaq NexGen Economy China fund, that will focus on blockchain and cryptocurrency startups in Hong Kong and mainland China.
According to Forbes, the new ETF was filed with the Securities and Exchange Commission (SEC) on April 5 and has 75 days to launch. Reality Shares plans to officially launch the blockchain-focused ETF sometime before June with around 39 Chinese companies, including mainland shares and some ADRs traded on the NYSE.
Back in January, Reality Shares launched its Nasdaq NextGen Economy (BLCN) ETF with just $2.5 million in seed capital. It now has $115 million in net assets. The holdings consist of 64 mostly large-cap stocks like Intel and Microsoft.
“The companies we are investing in have to have a blockchain product of their own or a component of blockchain in their business,” Reality Shares CEO Eric Ervan explained to Forbes. The distinction allows Reality Shares to include blue chips as well as riskier blockchain pure-plays in its ETFs, reducing volatility and adding to the number of companies to select holdings from.
Holdings are selected using Reality Shares’ Blockchain Score™ methodology, which is described as “a rules-based, quantitative process built to evaluate the highest-quality companies in various industries across the globe based on their blockchain-related innovative potential.”
“Our methodology, based on a series of quantitative factors, produces a Blockchain Score for each company evaluated for inclusion in the underlying Reality Shares Nasdaq Blockchain Economy Index. These factors relate to each company’s role in the blockchain technology ecosystem and its participation in industry groups, the degree to which the company’s blockchain technology is developed, innovative, economically impactful and publicly referenced, and the company’s general research and development expenditures.”
The methodology is used to create a Blockchain Index, which helps determine the holdings in the company’s ETFs. The Index’s advisory board includes several notable figures from the blockchain world, including the founder and CEO of ShapeShift, Erik Voorhees.