DeFi

Crypto rebalance

Portfolio Rebalance – September 2022
Portfolio Rebalance – September 2022 2560 1707 cryptonews@arxnovum.com

Arxnovum Investments is pleased to report that we have completed the implementation of the index rebalance of our digital asset funds.  The additions to and deletions from the Arxnovum DeFi Index Fund and the Arxnovum Multi Crypto Index Fund were initially published on our blog last week. 

The purpose of today’s blog is to review the impact to the weights of the holdings in each portfolio.

Arxnovum DeFi Index Fund
(Fund holdings)

The largest increase in weight was to new holding 1inch (1inch) at 4.52% and existing holding Uniswap (UNI) at 2.04%. While the largest decrease was to Polygon (MATIC) by 2.09%.

The strong relative performance of the Services group, which was led by MATIC, has resulted in the Services group reweighting down to 15% from 18%.  This reduction in weight resulted in a 2% increase to the Services group and a 1% increase to the Settlements group.  These changes in group weights brings the portfolio back to its target allocation of 70% Sector, 15% Services and 15% Settlements.

Finally, the Settlements group saw the introduction of a new holding with the addition of Avalanche (AVAX) to complement Ether (ETH).

Arxnovum Multi Crypto Index Fund
(Fund holdings)

The largest increases in weights were to new holdings Shiba Inu (SHIB) at 2.67%, Avalanche (AVAX) at 1.79% and Litecoin (LTC) at 1.78%. 

The multi crypto index had a significant increase in diversification with the addition of 5 new constituents which now comprise 7.26% of the portfolio.  The total number of portfolio constituents now stands at 16.

On the back of strong relative performance, the weighting to Ether (ETH) and Solana (SOL) was reduced back to their market capitalization weights. ETH was reduced by 5.32% while SOL was reduced by 1.66%. There were no deletions from the portfolio.  

The strength of ETH also resulted in the overweight to Core coins, Bitcoin (BTC) and ETH, relative to the Altcoins in the portfolio.  Therefore, the portfolio rebalance saw a 4.5% increase in the weight to the Altcoins portion of the portfolio. 

Finally, it is also important to note that BTC saw an increase in weight by 0.77%.

To see a complete breakdown of the portfolio holdings and weights:

Arxnovum DeFi Index Fund
Arxnovum Multi Crypto Index Fund
The products and services offered by Arxnovum are available to qualified investors in certain provinces and territories of Canada. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.
 
All investments contain risk and may lose value. Investing in the cryptocurrency market is subject to risks.  Cryptocurrency, often referred to as “virtual currency” or “digital currency”, operates as a decentralized, peer-to-peer financial exchange and value storage that is used like money. Cryptocurrency operates without the oversight of a central authority or the banks and is not backed by any government. Even indirectly, cryptocurrencies such as bitcoin may experience high volatility, and related investment vehicles may be affected by such volatility. Cryptocurrency is not legal tender. Federal, state, provincial, territorial or foreign governments may restrict the use and exchange of cryptocurrency, and regulation in North America is still developing. Cryptocurrency trading platforms may stop operating or permanently shut down due to fraud, technical glitches, hackers or malware, which could have an adverse impact on the net asset value per unit of the Fund. Please consult the Funds Term Sheet for a complete list of risks.
 
Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” or “estimate,” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what Arxnovum Investments Inc. and the portfolio manager believe to be reasonable assumptions, neither Arxnovum Investments Inc. nor the portfolio manager can assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.
Portfolio manager adding new pieces to a portfolio

Index Reconstitution Announcement
Index Reconstitution Announcement 2560 1092 cryptonews@arxnovum.com

Last week the index provider, CF Benchmarks, that guides the Arxnovum Multi Crypto Index Fund and Arxnovum DeFi Index Fund announced changes to the index constituents as part of its semi-annual reconstitution.

The CF Diversified Large Cap Index, the underlying index to the Arxnovum Multi Crypto Index Fund, experienced the biggest change expanding the number of constituents from 11 to 16.  Changes to the index will be effective September 1 and will include the addition of:

  • Ape Coin (APE)
  • Avalanche (AVAX)
  • Internet Computer (ICP)
  • Litecoin (LTC)
  • Shiba Inu (SHIB)

In our opinion, this nearly 50% increase in the number of holdings should be seen as a positive for investors in the fund for the following reasons:

  1. increases diversification
  2. reduces idiosyncratic risk 
  3. indicates that the crypto markets are maturing as 16 constituents now fall within the 95th percentile of the market

Meanwhile, the CF DeFi Composite Index, the underlying index to the Arxnovum DeFi Index Fund, will have two additions and one removal. The big change here is the removal of Amp (AMP) for reasons that relate to the regulatory scrutiny it has recently come under, see our blog on this subject from earlier this month for more details. The index will add 1inch (1INCH) and Avalanche (AVAX). 

In order to achieve each Fund’s investment objective to track these underlying indices, we are planning to implement these changes to our funds inline with the index reconstitutions next week.

The products and services offered by Arxnovum are available to qualified investors in certain provinces and territories of Canada. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.
 
All investments contain risk and may lose value. Investing in the cryptocurrency market is subject to risks.  Cryptocurrency, often referred to as “virtual currency” or “digital currency”, operates as a decentralized, peer-to-peer financial exchange and value storage that is used like money. Cryptocurrency operates without the oversight of a central authority or the banks and is not backed by any government. Even indirectly, cryptocurrencies such as bitcoin may experience high volatility, and related investment vehicles may be affected by such volatility. Cryptocurrency is not legal tender. Federal, state, provincial, territorial or foreign governments may restrict the use and exchange of cryptocurrency, and regulation in North America is still developing. Cryptocurrency trading platforms may stop operating or permanently shut down due to fraud, technical glitches, hackers or malware, which could have an adverse impact on the net asset value per unit of the Fund. Please consult the Funds Term Sheet for a complete list of risks.
 
Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” or “estimate,” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what Arxnovum Investments Inc. and the portfolio manager believe to be reasonable assumptions, neither Arxnovum Investments Inc. nor the portfolio manager can assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.
Amp token illustration

Crypto token AMP deemed a security by the SEC
Crypto token AMP deemed a security by the SEC 1024 573 cryptonews@arxnovum.com

Constituent of Arxnovum DeFi Index Fund to be removed

Late last month the Securities and Exchange Commission (SEC) declared that AMP, along with 8 other crypto tokens, were potentially a security instead of a crypto asset. AMP has been a constituent in the Arxnovum DeFi Index Fund since its inception. 

In a 62 page complaint the SEC states that “a digital token or crypto asset is a crypto asset security if it meets the definition of a security, which the Securities Act defines to include “investment contract,” i.e., if it constitutes an investment of money, in a common enterprise, with a reasonable expectation of profit derived from the efforts of others.”

The complaint then goes on to outline how AMP, or its predecessor Flexacoin, meets the definition of a security. See pages 23-28 or the complaint for a complete review of the SEC’s position. 

As a result of the SEC complaint, prominent crypto exchange Binance.US has announced on Monday that they will be delisting AMP from its platform.  Of those nine tokens, only Amp (AMP) is listed on the Binance.US platform.

Arxnovum Investments is an investment manager that is dedicated to bringing you the best of the digital asset investing aligned with responsible regulatory oversight.  The construction of all of our investment strategies includes well defined rules to either exclude constituents from the initial screen or remove constituents that are included in the index if there exists Regulatory or legal actions that cast doubt as to whether the asset in question is indeed a crypto asset.  

Thus, we take the SEC’s allegations about AMP seriously and have elected to remove the constituent from the Fund.  The active decision to remove AMP and its 4.03% weight (as at August 3, 2022) from the Arxnovum DeFi Index Fund in advance of the removal from the underlying Index means that the fund will have a small amount of tracking error. We expect the CF Benchmarks to make an announcement on the status of AMP in the index in the coming weeks. 

Please contact us if you have any questions or would like to discuss further.

The products and services offered by Arxnovum are available to qualified investors in certain provinces and territories of Canada. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.
 
All investments contain risk and may lose value. Investing in the cryptocurrency market is subject to risks.  Cryptocurrency, often referred to as “virtual currency” or “digital currency”, operates as a decentralized, peer-to-peer financial exchange and value storage that is used like money. Cryptocurrency operates without the oversight of a central authority or the banks and is not backed by any government. Even indirectly, cryptocurrencies such as bitcoin may experience high volatility, and related investment vehicles may be affected by such volatility. Cryptocurrency is not legal tender. Federal, state, provincial, territorial or foreign governments may restrict the use and exchange of cryptocurrency, and regulation in North America is still developing. Cryptocurrency trading platforms may stop operating or permanently shut down due to fraud, technical glitches, hackers or malware, which could have an adverse impact on the net asset value per unit of the Fund. Please consult the Funds Term Sheet for a complete list of risks.
 
Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” or “estimate,” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what Arxnovum Investments Inc. and the portfolio manager believe to be reasonable assumptions, neither Arxnovum Investments Inc. nor the portfolio manager can assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.

What is DeFi?
What is DeFi? 2560 1711 cryptonews@arxnovum.com

Simplifying the new world of decentralized finance (or DeFi) into its most basic form.

We are an investment management company that specializes in cryptocurrency investing. Led by Shaun Cumby, Canada’s first CIO of a publicly traded Bitcoin fund, and a diverse team with years of investing expertise in both traditional and crypto assets, our strategies are designed to effectively combine crypto assets within traditional portfolio holdings. We’re excited to be introducing our DeFi Index Fund to Canadian investors.

The products and services offered by Arxnovum are available to qualified investors in certain provinces and territories of Canada. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.
 
All investments contain risk and may lose value. Investing in the cryptocurrency market is subject to risks.  Cryptocurrency, often referred to as “virtual currency” or “digital currency”, operates as a decentralized, peer-to-peer financial exchange and value storage that is used like money. Cryptocurrency operates without the oversight of a central authority or the banks and is not backed by any government. Even indirectly, cryptocurrencies such as bitcoin may experience high volatility, and related investment vehicles may be affected by such volatility. Cryptocurrency is not legal tender. Federal, state, provincial, territorial or foreign governments may restrict the use and exchange of cryptocurrency, and regulation in North America is still developing. Cryptocurrency trading platforms may stop operating or permanently shut down due to fraud, technical glitches, hackers or malware, which could have an adverse impact on the net asset value per unit of the Fund. Please consult the Funds Term Sheet for a complete list of risks.
 
Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” or “estimate,” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what Arxnovum Investments Inc. and the portfolio manager believe to be reasonable assumptions, neither Arxnovum Investments Inc. nor the portfolio manager can assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.

Arxnovum is a traditional portfolio manager for separately managed accounts utilizing a breadth of financial assets and strategies. 
Arxnovum Funds, Arxnovum ETFs and Crypto Corner are trademarks of Arxnovum Investments Inc.
© 2023 Arxnovum Investments Inc.

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