U.S. largest cryptocurrency operator, Coinbase, has teamed up with asset management firm Wilshire Phoenix to launch a new crypto-focused fund, which will initially have a capital pool cap of $500 million. The partnership builds on Coinbase’s extensive range of institutional product offerings, including Coinbase Custody, which was the exchange’s arm that signed the agreement with the New York-based advisory firm.
The joint venture between Coinbase Custody and Wilshire Phoenix provides institutional grade exposure to Bitcoin. However, the firms didn’t share further details about the new investment vehicle, only saying it employs a patent-pending approach to mitigate the risks arise from huge volatility or the current collapse in coin prices.
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Although the official announcement states the new fund would include features to meet investors’ regulatory and operational needs, but this doesn’t mean it will directly hold Bitcoin or multiple cryptocurrencies. In addition, the dedicated crypto fund will not use derivatives or any form of leverage “to achieve its objective.”
In that respect, it will be less similar to an ETF and more like the private placement investments which are sold to accredited investors to enable them to have exposure to cryptocurrencies in traditional financial accounts.
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The objective, it said, is to limit counterparty exposure and “the often unnecessary additional fees that are normally associated with these types of financial products or methods.”
Mixed news about Coinbase’s institutional push
The launch of the new fund is the latest investment vehicle to emerge in the cryptocurrency space. Just last month, Australian cryptocurrency exchange CoinJar launched an index fund targeting wholesale investor, dubbed “The CoinJar Digital Currency Fund.” In order to qualify, an investor must have net assets of no less than AUD$2.5 million or have had a gross income of AUD$250,000 for the last two years.
The announcement is also interesting after recent reports alleged that Coinbase was shutting down its index fund service due to weak interest from investors since it launched “the S&P 500 index equivalent” of the crypto world earlier this year.
Commenting on the news, Sam McIngvale, General Manager of Coinbase Custody Trust, said: “As a regulated Qualified Custodian and fiduciary, Coinbase Custody will not only offer Wilshire Phoenix clients’ secure storage for digital assets, but also the ability to perform GAAP-compliant audits whenever the need arises.”
“Coinbase Custody provides Wilshire Phoenix a best in class platform on which to securely store digital assets. They are steadfast in their commitment to implementing and executing solutions for institutional clients as opposed to merely talking about their future plans to do so,” added Bill Herrmann, founder & CEO of Wilshire Phoenix.