Why is the ETFS Fintech & Blockchain ETF (FTEC) not listed on the ASX?

An ETF Securities executive tells The Motley Fool why it listed with Australia’s alternative stock exchange for its latest product.

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ETF Securities‘ new exchange-traded fund ETFS Fintech & Blockchain ETF (Chi-X: FTEC) has attracted much attention since its launch last month.

The fund scratches an itch that many investors have been wanting for a while — diversified exposure to companies at the coalface of blockchain and fintech.

But one big question that arose was why the new product was launched on Australia’s second-biggest exchange Chi-X rather than the largest, the ASX.

One massive advantage was that it could be brought to market earlier, ETFS head of distribution Kanish Chugh told The Motley Fool.

“We felt there were potentially some hurdles, at the time, with the ASX,” he said.

“We really wanted to say ‘Investors want this strategy — how can we get it to market?’ And Chi-X were working quite closely with us around that… we’d get this out to investors quicker.”

Listing on Chi-X allowed the product to be launched in October, making it the first blockchain-focused ETF in Australia.

It makes no difference to 90% of retail investors 

Chugh claimed that for most Australian retail investors, the fact that FTEC is listed on Chi-X would make no difference.

“Pearler, Superhero, Selfwealth Ltd (ASX: SWF) — all 3 have Chi-X connectivity or offer FTEC. CMC Markets, NABTrade, AusieX, CommSec — they’re all offering Chi-X-listed funds,” he said.

“For the retail investor, I’d say about 90% of the market is covered.”

Contrary to public perceptions, there is little difference in functionality between ASX and Chi-X and that competition is healthy, according to Chugh.

“Chi-X was recently acquired by CBOE Global Markets Inc (BATS: CBOE),” he said.

“That’s a good indication that they’re not just a small player in this market. They’re wanting to be a bigger player.”

Chugh also added that Magellan Financial Group Ltd (ASX: MFG) and others had recently also listed funds on Chi-X, foregoing the ASX’s near-monopoly.

FTEC boasts $10 million of funds and is up 7% since launch

FTEC follows the Indxx Developed Markets Fintech & DeFi Index.

That basket consists of 75 fintechs from developed nations, with a focus on blockchain and decentralised finance (DeFi) technologies.

“FTEC uses a full-replication strategy to track the index, meaning that it holds all the shares that make up the index,” states ETF Securities’ product page.

“Companies are equally weighted, meaning at each rebalance the companies are bought in an equal proportion.”

Chugh told The Motley Fool that FTEC now has $10 million under management and the share price is up 7% since its 14 October launch.

The investments are broader than just cryptocurrency-related businesses, which are a subset of the blockchain family. Chugh felt this made FTEC less volatile.

“We feel this product, in the long term, will be a mainstay in portfolios.”

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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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