Institutional investors are looking for ways to participate in the crypto market without going out of the regulated space or mastering the advanced technology behind Bitcoin (BTC), and asset managers are finding alternative solutions to meet the need.
Paris-based investment management company Melanion Capital partnered with index platform Bita to launch the Melanion Bitcoin Exposure Index, according to information shared with Cointelegraph.
The index tracks a beta-weighted equities basket exhibiting the highest correlation and revenue exposure to BTC to follow the biggest cryptocurrency’s performance in a traditional investment fund format.
Melanion Bitcoin Exposure Index is built to provide investors “with exposure to the daily price movements of Bitcoin through a diversified basket of equities that meets traditional investment fund standards,” the announcement reads. The index would enable banks and asset managers to offer Bitcoin exposure to their clients in various wrappers such as investment funds, exchange-traded funds, certificates or structured products in a European regulatory compliant format.
Using Europe- and North America-based companies that operate or invest in the crypto space as a basis, the index is comprised of the 30 companies that are most correlated to Bitcoin, with their weights allocated accordingly. Liquidity filters and weight caps are applied to guarantee the stability and scalability of the Index.
Reminding that the European regulators’ look-through approach renders a majority of Bitcoin-backed exchange-traded products ineligible for institutional investors and funds, Melanion Capital president Jad Comair said that the Melanion Bitcoin Exposure Index closes the gap between Bitcoin and EU regulation. “This index is a true bridge between two worlds,” he added.
Since it closely tracks the performance of BTC in a diversified basket and eliminates usual risks like loss or hacking, the index has its own set of advantages in comparison to a straight investment in Bitcoin, Comair said.
“Bitcoin’s main concerns for institutional investors are hack, theft, loss, storage, security or crime. By investing in equities replicating the Bitcoin performance, investors can achieve diversified asset allocation that was not available before.”