Future of Finance Monthly Report | September

Future of Finance ETF: Key Takeaways

• August 2022 was a volatile period for the Bloomberg Grayscale Future of Finance Index as it ended the month with only a slight positive gain despite providing almost 25% in total return through the first two weeks of August. The index outperformed major benchmark indexes such as the S&P 500, the Russell 2000, and the MSCI ACWI, which all ended the month in negative territory. Investor sentiment in the first half August was positive due to a surprisingly strong U.S. employment report and lower-than-expected Consumer Price Index (CPI) inflation data. Towards the end of the month, however, U.S. Federal Reserve Chair Jerome Powell delivered a hawkish speech at Jackson Hole, noting that the Fed will continue to use restrictive monetary policy “for some time” to tame inflation. While volatility might persist, we continue to remind investors to be mindful of the long-term approach that tends to benefit the most with thematic investing. [1]

• August was a busy month of quarterly earnings releases, and while many Future of Finance companies’ bottom lines missed analyst estimates, about half of the basket still managed to deliver notably strong results. For example, while Coinbase Global Inc. (NASDAQ: COIN) - a key Exchange name within the Financial Foundations pillar of the Fund - missed both top and bottom lines versus expectations, it jumped 35% at the open on August 4th (the most in 15 months) when it announced a partnership with BlackRock to create new access points for institutional crypto adoption by connecting Coinbase Prime with BlackRock’s Aladdin. On the other hand, Marathon Digital Holdings Inc. (NASDAQ: MARA), like most other Miners within the Digital Asset Infrastructure pillar of the Fund, surprised to the downside for both top and bottom lines and performed poorly. The second quarter saw Bitcoin sell off almost 60%, and many miners were forced to write down the value of their Bitcoin holdings. In addition, we witnessed a number of these companies sell a portion of their Bitcoin holdings and/or mining equipment to fund operating costs. [2]

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

• Investors appear to be expecting increased volatility in the equity markets in the near-term, as evidenced by the CBOE Volatility Index (VIX) ending August at 25.9, notably higher than at the end of July. All eyes will be on the U.S. Federal Reserve again when it meets in late September. After two large 0.75% interest rate hikes in June and July, traders in early September see a good chance of another 0.75% increase. Bitcoin has continued to find significant support around the $20,000 level since mid-June amid two large rate hikes and is, so far, unfazed by the expectation of a third one later in September. [3]

• Barring any tail-like events, the $20,000 level appears to be a key support level for Bitcoin and may also act as support for other key digital assets, which we believe is constructive for the performance of several Future of Finance companies. The Future of Finance UCITS ETF is not intended to serve as a replacement for exposure to digital assets, but we continue to mindful of the linkage that many of these names, especially the mining companies, have to the performance of assets like Bitcoin. As the theme matures and continues to grow, we expect more of the entire value chain to be wholly represented. [4]

• August marked another month of strong net inflows across the ETF marketplace for both equity and fixed income products. In the U.S. ETF marketplace, we saw almost $30B in net inflows across equity products, and over $15B in net creations across fixed income products. Interestingly, we noticed a wide variety of thematic products seeing positive momentum in inflows, products that spanned broad clean energy, solar, uranium, cloud computing, cybersecurity, and broad innovators. The continued interest in thematic investing supports the idea that allocations to these segments of the marketplace are expanding, and investors are continuing to pay attention to industries at the core of structural change, even those at nascent stages. [5]

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

GFOF Performance Table (As of 31.08.22)

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31/08/2022. 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.

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