Future of Finance Monthly Report | August

Future of Finance ETF: Key Takeaways

July 2022 was a standout month for Future of Finance companies as they delivered notable outperformance relative to benchmark indexes such as the S&P 500, the Russell 2000, and the MSCI ACWI. The performance follows a notable decrease in volatility to finish the month of June, and while short-term results may appear to be episodic, we continue to remind investors to be mindful of the long-term approach that tends to benefit the most with thematic investing. [1]

Throughout the month of July, we saw notable contribution to returns from companies in the Mining and Payment Platforms sub-themes. Silvergate Capital (NYSE: SI), a key Asset Management name within the Digital Asset Infrastructure pillar, was also a standout performer off a strong earnings report in mid-July where they delivered results that beat expectations on both the top and bottom lines. In their Q2 earnings release, Silvergate cited a 29% increase in customers on a year-over-year basis, and the transaction volume on the Silvergate Exchange Network (SEN, their 24/7 monetary exchange platform) increased by 34% quarter-over-quarter.[2] Marathon Digital Holdings (NASDAQ: MARA) was the best performer in the Bloomberg Grayscale Future of Finance Index, and only two names saw negative performance during the month of July.

The structural change occurring within the digital economy continues to show long-term growth potential, despite the current, volatile environment. To illustrate, over the trailing two years ending 30/06/2022, we have seen the market capitalization of the 20 stocks in the ETF increase by 282% and expansion into public markets for names like Coinbase and Bakkt Holdings. [3]

Source of all data: Grayscale Investments. Please remember that all performance figures are showing net data. Past performance is not indicative of future performance.

Macro Outlook

Both trend and momentum screen positively for the Bloomberg Grayscale Future of Finance Index going into August, which does coincide with a notable recovery in the price of Bitcoin over the course of July.[3] While the performance of key digital assets like Bitcoin will continue to be supportive for index performance, especially the Mining companies, we continue to stress that the Grayscale Future of Finance UCITS ETF is not intended to deliver a replacement for exposure to digital assets. We think that investors will find that it may help fit exposure needs within the growth equity sleeve in their portfolios.

The Grayscale Future of Finance UCITS ETF delivers pure-play exposure to companies at the intersection of Finance, Technology, and Digital Assets. This results in exposure that is relatively nuanced in nature and covers a still nascent theme. We think that July may prove to have been a very important month for asset allocations, as we saw notable flows into higher beta segments of the markets. For example, in the U.S., we saw notable flows into Small Caps, Growth, and High Yield. We saw outflows from categories such as short-duration and precious metals. This is not to say that July marked the start of a swift rotation back to higher beta exposures, but that investors have meaningfully allocated to portions of the market that were less attractive just a short period ago. We continue to believe that investors should watch the Grayscale Future of Finance UCITS ETF for opportunistic ways to introduce a unique, thematic exposure into their clients’ portfolios.

Past performance is not indicative of future performance. When you invest in ETFs, your capital is at risk.

GFOF Performance Table (As of 31.07.22)

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31/07/2022. Performance before inception is based on back tested data. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. When you invest in ETFs and ETCs, your capital is at risk.

Learn more about our future of finance ETF.