First Purchased Bitcoin
After two years of due diligence, IDX’s CIO purchased Bitcoin for the first time
In the developing world of blockchain technology, we believe that a quantitative, data driven approach is the most prudent way to navigate the evolving landscape.
We approach the digital assets markets through this lens and build robust solutions for the asset class by optimizing for Risk Mitigation, NOT Return Enhancement.
At IDX we are focused on developing Risk-Managed Digital Assets Solutions that make it simple for fiduciaries and investors to participate in the asset class.
A brief history of our digital asset experience
After two years of due diligence, IDX’s CIO purchased Bitcoin for the first time
In the summer of 2013 our research team launched two Bitcoin nodes to begin analyzing large datasets in the BTC economy (i.e. on-chain analytics)
As career-long Quants we sought to apply our rules-based insights to Bitcoin via the IDX Tactical Bitcoin SMAs and began managing institutional and advisory capital
IDX was the first in the world to launch Digital Assets Indices calculated by S&P Dow Jones
As the regulatory landscape matured, IDX launched a risk-focused mutual fund based on its first-of-a-kind index, which seeks to provide risk-managed exposure to Bitcoin via CME Bitcoin Futures.
Since Bitcoin’s inception, the growth of the asset class has only been rivaled by that of the internet and the “Dot Com” era. So, why have fiduciaries and professional investors approached the asset class with trepidation? Following our conversations with hundreds of financial advisors, family offices, and institutions, we’ve identified a pattern; downside volatility and principal protection are rarely a focus within the community of early adopters and practitioners.
We began managing outside capital in the form of Separately Managed Accounts in 2019 with a dedicated focus on Risk-Mitigation, NOT Return Enhancement. Over time, the regulatory landscape has matured and the instruments available for gaining exposure to the asset class have evolved for the better. From our initial SMAs for fiduciaries, we created Risk-Managed Digital Asset Private Placements for accredited investors and institutions for Bitcoin, Ethereum, and DeFi. Now, we are proud to bring our Risk-Focused US Mutual Fund to market, the IDX Risk-Managed Bitcoin Strategy Fund (BTIDX).
Similar to the ‘Internet Boom’ in the late 90s and early 2000s, digital assets have been subject to Moore’s Law, with new developments and improvements in technology (protocols) happening on a daily basis. Our research and investment teams are deeply involved in blockchain technology, evaluating our internally managed data (nodes), auditing the source code (smart contracts) of protocols, and participating in the ‘prudent’ development of the ecosystem. The fiduciaries who partner with IDX are able to benefit from these insights, and intelligently participate in the growth of the industry.
Since its inception in 2009 in response to the Great Financial Crisis, Bitcoin (and blockchain technology, in general) has emerged as a disruptive asset class with early applications across multiple industries (including payments, finance & entertainment). As such, the interest in bitcoin within institutional investors’ portfolios has increased accordingly.
In traditional asset classes a “Bear” market is classically defined as a 20% or greater decline from recent highs amid widespread pessimism and negative sentiment. Many investors are surprised to learn that Bitcoin has commonly exceeded bear market territory, as classically defined, several times per annum since its inception in 2009. In addition to the relative frequency of bear market drawdowns, as compared against traditional asset classes (i.e gold, real estate, stocks and bonds, the severity of drawdown has exceeded 50% and even 80% thresholds several times during its existence.
The Fund’s manager, IDX, believes that the IDX Risk-Managed Bitcoin Strategy may provide investors with total returns over time, while reducing the volatility and the large drawdowns associated with passively owning CME Bitcoin Futures. Historical volatility is not necessarily indicative of future volatility, and therefore changes in market conditions, and other factors, might result in the actual realized volatility and drawdowns of the IDX Risk-Managed Bitcoin Strategy Fund (the “Fund”) for any particular period to be materially higher. The return of the Fund for any given period might be materially different than the returns of Bitcoin or CME Bitcoin Futures depending on the allocation decisions made by the Fund’s manager in its efforts to implement the Risk-Managed Strategy.
How does a Bitcoin futures contract work?
Bitcoin futures contracts are “cash-settled” which means no actual bitcoin is delivered at the expiration of the futures contract. Rather, the cash difference is settled between parties. In order to maintain exposure over time, futures contracts must be “rolled” from one month to another. When outer month contracts are trading at a premium, the “term structure” is in “contango” and there’s a cost of rolling contracts.
How do Bitcoin Futures Mutual Funds differ from ETFs?
Bitcoin Futures-based mutual funds have liquidity once per day as opposed to throughout the day, as is the case with ETFs. To learn more about structural differences between the vehicles, click here to see an overview from our CIO.
Does the fund distribute a K-1?
No the Fund does not produce a K-1. Shareholders will receive a 1099 on an annual basis.
Does the fund invest in digital assets directly?
The fund does not own digital assets or cryptocurrencies such as Bitcoin (BTC) directly, the fund gains exposure via the CME Bitcoin Futures market and publicly traded Bitcoin Industry Companies. The fund also holds U.S. Treasuries and other cash substitute instruments.
|Gross Expense Ratio||2.64%|
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For more information including standard performance of the Funds, please visit the Fund page to download the fact sheet.
There are risks involved with investing including the possible loss of principal. Diversification does not guarantee investment returns or eliminate the risk of loss. Past performance does not guarantee future results.
Investors should carefully consider the investment objectives, risks, charges and expenses of the fund before investing. To obtain a prospectus containing this and other important information, please visit the Fund page to download a prospectus online or Click Here. Read the fund’s prospectus carefully before you invest.
The Fund actively invests in bitcoin futures contracts and other instruments that provide exposure to bitcoin futures. The Fund does not invest directly in or hold bitcoin. The price of bitcoin futures contracts should be expected to differ from the current cash price of bitcoin, which is sometimes referred to as the “spot” price of bitcoin. Consequently, the performance of the Fund should be expected to perform differently from the spot price of bitcoin. These differences could be significant. – Bitcoin and bitcoin futures contracts have historically been more volatile than traditional asset classes. The market for bitcoin futures may be less developed, and potentially less liquid and more volatile, than more established futures markets. While the bitcoin futures market has grown substantially since bitcoin futures commenced trading, there can be no assurance that this growth will continue. Given the complexity of the strategies of the Fund, the Adviser relies heavily on quantitative models and information and data both proprietary as well as supplied by third parties (“Models and Data”). Models and Data are used to rank investments and provide risk management insights. The use of predictive models has inherent risks. Investing in derivatives, including bitcoin futures contracts, may be considered aggressive and may expose the Fund to significant risks. The Fund may incur high portfolio turnover to manage the Fund’s investment exposure. The fund is non-diversified and can invest a high percentage of assets in a small number of issuers which may increase volatility and risk versus a diversified portfolio.
Volatility is a measure of the variation of the level/ price of an asset over time as generally expressed as the annualized standard deviation of daily returns.
Drawdown refers to the percentage decline in asset value from its all time high.