Exchange-traded funds (ETFs) are some of the most attractive investment vehicles for passive investors in the public equity markets. As an investment strategy, index investing increases accessibility for a range of investors by offering exposure to select assets while providing lower-cost diversification, trading, and arbitration opportunities. It reduces the time spent on research and alleviates the stress for those managing their money.
Indexed Finance’s first products proved capitalization-weighted index pools may replicate public equity indexed funds for digital assets and cryptocurrencies. Similar to the ETFs in the public equity markets tokenized indexed pools, created by Indexed Finance, offer investors exposure to digital assets without having to actively manage their portfolio.
The growth of the ETF industry is not an accident as the goal of ETFs is to replicate the performance of an index or a select financial instrument. According to ETFGI and Statistica, the total number of ETFs traded globally exceeded 7,602 in 2020 up from 7,083 in 2019. In 2003, the total was merely 276 ETFs. In 2020, nearly 160 ETF issuers offered ETFs. The three top issuers by AUM; iShares offered 374 ETFs with $2,078.12b AUM, Vanguard offered 81 ETFs with $1,579.54b AUM, and State Street SPDR offered 141 ETFs with $859.63b AUM.
Indexed Finance has an opportunity to become the major player in the future development of digital asset passive investment strategies by creating multiple tradable indices (represented as tokens of ownership) with a diverse set of underlying digital assets and cryptocurrencies.
However, along with the development of each ETF in the public equity space is a critical understanding to each ETF to foster accelerated and continued growth, each tokenized ETF created by Indexed Finance need a considerable number of documents and research to identify the objectives, risks, charges, and expenses for investors. While tokenized etfs are in an exploratory stage of advancement, defining the market standards for performance in a succinct fashion will grow the interest in the funds while supporting the larger crypto/defi community.
Documentation for each fund may include the investment case for the underlying digital assets; fact sheets on fund performance; a methodology guide outlined defining the protocol; an investment prospectus defining principal investment risks, management of the fund, and the fund’s investment strategy; a summary prospectus; and internal reports on a scheduled basis for the investment community.
Each of these documents serves a critical role in the existing tradfi market space, as used by the top players mentioned above. This research and documentation are consistently provided by growing ETF players such as Defiance ETFs, Ark Funds, and Proshares.
My proposal is to establish a team focused on internal data collection and document creation for the investing community of Indexed Finance which works in lock-step with the sigma committee. As the sigma committee establishes new funds with the support of the community, this team will provide investment-grade research and education to bolster the reputation of Indexed Finance funds and the project itself. This team would be focused on funds in two-fold, the research supporting Sigma committee fund development and the marketing of the fund post-inception.