Future of Finance ETF Monthly Report | December

29 December 2023

Future of Finance ETF Key Takeaways | December

The Future of Finance ETF delivered strong continuation in November off of a positive close in the prior month. November was a great month for risk assets across the board on the back of signs of economic resiliency and falling inflation across global economies. 

Data releases over the month (U.S. CPI, U.K CPI, Eurostat’s flash CPI, etc.) all supported the idea that central banks have or are near their peaks in tightening. Future of Finance companies delivered notable absolute performance and, in a relative context, outperformed their “peers” across smaller cap companies and those in other high growth areas of the market. 

At the close of the month, Mining companies have crossed back above 50% representation in the Future of Finance ETF as they were once again leaders (as a group), posting a double digit return in November. Iris Energy and Cleanspark were standouts on the back of increased mining capacity and production results. 

Coinbase continues to be one of the prominent names within the theme as their critical role as a custody solutions provider is certainly in focus across the industry. Block, another household name, had a strong month due to strong transactions volume, growth of the cash app, and further integration of digital asset capabilities. In their most recent report, Block noted that Bitcoin sales rose to $2.4B for a single quarter.

While we have (and continue to) pointed out that Future of Finance companies transcend exposure to just digital assets in a vacuum, it is worth noting that the world’s largest digital asset, Bitcoin, is on track to be one of the best performing major assets of the year. It also remains an asset that many companies within the Future of Finance UCITS ETF are most tied to (specifically, Mining companies). 

While leadership has tilted across the digital asset landscape throughout the year, Bitcoin has continued to deliver outstanding risk adjusted results, shown flight-to-quality behaviours, and has seen its correlation to other risk assets fall throughout 2023.

 

Source of all performance data: Grayscale / Bloomberg. Data as of 30/11/2023. Additional sources available upon request. Please remember that all performance figures are showing net data. Past performance is not indicative of future performance and when you invest in ETFs your capital is at risk.

Macro Outlook

Throughout November, financial markets appeared to relax about a variety of tail risks, which helped previously underperforming assets to rebound. For instance, positive signs from the Middle East conflict seemed to reduce fears about a wider regional disruption. Similarly, long-maturity Treasury bonds rose in price (declined in yield) after the Treasury Department announced a smaller-than-expected increase in borrowing needs. Consumer price inflation also continued to decline, raising hopes for eventual Fed rate cuts and a potential “soft landing” for the US economy. These macro factors continue to support the momentum into the end of the year for high-growth or higher multiple areas of the equity landscape, Future of Finance companies included.

The progress of access in one of the largest addressable markets in the world, the U.S., has been a significant tailwind for digital assets and several Future of Finance companies throughout 2023. We expect that the momentum behind this “micro” factor within this macro theme is set to continue in December and into January of 2024. Companies like Coinbase who have been critically and well positioned to service both wide adoption and institutional access have been leaders as a result, and the numbers tell the story this year. Looking forward, we continue to watch for further development of the rails and infrastructure around payments, access, and liquidity as the Future of Finance theme continues to take fold.

Future of Finance ETF Performance
 
As of 30/11/2023

 

1M

3M

6M

YTD

12M

2Y

SI

Grayscale Future of Finance UCITS ETF

12.41%

7.46%

-0.21%

5.11%

7.61%

-1.70%

-8.60%

Bloomberg Grayscale Future of Finance Index

12.47%

7.58%

0.07%

5.91%

8.47%

-0.41%

-7.28%

 

 Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 30/11/2023

Performance before inception is based on back-tested data. Backtesting is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such a 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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