From this initial basket of companies, companies are then screened based on a natural language processing algorithm, which reads through a large volume of textual data on online media platform and databases and identifies those strongly tied to blockchain technology. The strongly-tied screened companies are then grouped into four so-called Stakeholder categories, including “Cryptocurrency Payees” or companies that accept cryptocurrency as payment and are developing blockchain payment solutions; “Mining Enablers” or companies that create hardware to enable creation of new blockchains or are mining blockchains; “Solutions Providers” or companies that assist organizations in the creation and implementation of blockchain applications; and lastly “Adopters” or those that primarily use blockchain technology.
Each of the four Stakeholder categories are allowed a maximum 15 company components and each individual weighting is capped at 7% at the time of reconstitution. The ETF’s underlying index is reconstituted on a semi-annual basis in June and December, and it is rebalanced on a quarterly basis to their original weights.
Potential investors should be aware that due to its indexing methodology, KOIN may include companies with minimal ties to blockchain. Additionally, the fund itself will not invest in initial coin offerings or crytpocurrency directly.
Innovation Shares is also working on the Innovation Shares NextGen Vehicles & Technology ETF (EKAR), which they intend to launch in the coming weeks.
The two NextGen ETFs are “multi-decade themes,” Markiewicz added. “It is not our plan to stop at past these two themes.”
For more information on new fund products, visit our new ETFs category.