First Trust blockchain ETF employs index strategy

Rudy Luukko 24 March, 2018 | 1:00AM

A third Canadian-listed exchange-traded fund specializing in blockchain technologies opened for trading today with the launch of First Trust Indxx Innovative Transaction and Process (symbol: BLCK) on the Toronto Stock Exchange.

Sponsored by Toronto-based First Trust Portfolios Canada, the ETF's strategy is to substantially replicate the performance of the Indxx Blockchain Index. This index was created by Indxx LLC and licensed to the U.S.-listed First Trust Indxx Innovative Transaction & Process (LEGR), which began trading on Jan. 25.

The new TSX-listed ETF will carry out its strategy by investing in units of the similarly named U.S. ETF, which is managed by an affiliate of First Trust Portfolios Canada.

In addition to the Canadian ETF's management fee of 0.15%, investors will also bear the cost of the underlying ETF's management fee of 0.65%. This will bring the total management-fee costs borne by investors to 0.80%. The management fees cover most expenses.

The constituents of the Indxx Blockchain Index consist of shares of companies in various industries that are providers or developers of blockchain products and systems and/or have the potential to materially benefit from the increased efficiency that the decentralized digital-ledger technology could provide to their businesses. The index will be rebalanced and reconstituted semi-annually in March and September of each year.

The stock-selection universe includes both developed and emerging markets, and a wide range of market capitalizations. The minimum market cap for inclusion in the index is US$250 million, and the free float of shares must be at least 20% of outstanding shares.

Current top holdings in the index include Micron Technology Inc. (MU),  Alibaba Group Holding Ltd (BABA) and  NVIDIA Corp (NVDA).

The newly launched First Trust ETF joins two other Canadian ETFs with similar mandates: Blockchain Technologies (HBLK), launched in February, followed by Evolve Blockchain (LINK), which began trading in March.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Alibaba Group Holding Ltd ADR201.89 USD0.94
Micron Technology Inc47.93 USD2.81
NVIDIA Corp212.17 USD1.64

About Author

Rudy Luukko

Rudy Luukko  Rudy Luukko is a freelance writer who contributes to Morningstar.ca on topics involving fund industry trends and regulatory issues. He retired in May 2018 from his position as editor, investment and personal finance, at Morningstar Canada, where he had worked since 2004. He has also worked as an editor and writer for various general, specialty and institutional media, and he has co-authored courses for the Canadian Securities Institute. Follow Rudy on Twitter: @RudyLuukko.