Bitcoin’s explosive rally sparked record inflows into spot bitcoin ETFs — and cemented investor preferences for this new asset class.
BlackRock Inc.’s iShares Bitcoin Trust (IBIT) and Fidelity Investments’ Wise Origin Bitcoin Fund (FBTC) captured 79% of total inflows in the “Newborn Nine” — the popular name for a group of new exchange-traded funds that invest . Directly in Bitcoin – since the US Securities and Exchange Commission approved the asset on January 10.
Four of the remaining seven funds have responded by cutting fees under the two leaders, according to a Bloomberg analysis of data from fund websites. Valkyrie Investments cut its fee in half from 0.25% to the 0.49% it imposed before the SEC approval. Franklin Templeton now offers a sector-low 0.19% after cutting its initial management charge by 10 basis points. Only Bitwise has not made any changes.
Bitcoin has been on a tear this year, surging above $63,000 as retail investors became wary of missing out on new ETFs. With companies increasingly pushing to lock down market share in the asset class, this divide among fund managers looks set to continue.
“I expect more concentration among the top ETFs,” said Brian Armer, Morningstar Inc. Director of Passive Strategies Research. “But others won’t go down without a fight.” The fee war should continue, which will put pressure on leaders to maintain their profits.
Grayscale Investments has taken a different approach since converting its Bitcoin trust to an ETF, opting to retain higher management fees than its new rivals. Its fund (GBTC) has seen more than $8 billion in inflows since launch, Bloomberg data shows.
“The Grayscale team anticipates GBTC’s diverse shareholder base will engage in profit-taking and implement investment strategies that will influence the flow of trust, and we are pleased that exits are stable over time,” a Grayscale spokesperson said in a statement. said in the statement. “We expect GBTC to continue to be a primary capital market risk transfer tool for Bitcoin.”
Sales have eased broadly, with daily outflows slowing from January’s $403 million to a daily average of $138 million in February. And Greyscale continues to be the largest fund, with $26 billion in assets under management, compared to BlackRock’s $10 billion.
In addition, there are signs that BlackRock is moving forward to dominate the fiduciary sector.
The New York-based firm’s IBIT fund won $612 million in new investments on Feb. 28, the most for a single day since inception, and it has taken in new flows for most of the past month.
The world’s largest fund manager’s distribution network likely offers investors better liquidity than most rivals, said Todd Sohn, an ETF and technical strategist at Strategase Securities.
“The flow and volume to BlackRock’s product reflect its commitment to this asset class,” Sohn said. “I want to make sure they realize that this is a ‘new’ part of an investment portfolio and are there to provide the access investors need.”