A new Bitcoin investment fund wants to provide local investors with the opportunity to add the asset class to their portfolio without the complexities of direct ownership.
The Vault International Bitcoin Fund is the first of its kind in New Zealand.
It is also the first fund offered by Vault Digital Funds, and it will be managed by Implemented Investment Solutions, which now manages $5 billion in assets for domestic and international investment businesses.
The Bitcoin Fund, which has a market capitalisation of approximately $1 million, would invest in international exchange-traded funds (ETFs) that hold bitcoin positions.
“Our focus at Vault is to provide simple, smart, and trusted access to investors looking for long-term well-structured exposure to digital assets such as bitcoin,” Vault Digital Funds co-founder and chief executive Vinnie Gardiner said.
He stated that the fund would be locally owned and controlled, with the goal of lowering the barriers to entry for investors interested in digital assets by removing the inconvenience of ownership.
“The reality has always been that if you own digital assets, you are the custodian of your own wallet which introduces some real risk.”
He listed these as “safely securing your assets online or offline,” “remembering passwords,” and “fear that your assets may be compromised.”
These included securing your assets safely online or off-line, remembering passwords or the concern that your assets may be hacked, he said.
Gardiner had firsthand knowledge of the latter, as he was one of the victims of the 2019 big hack of the Christchurch-based virtual currency exchange Cryptopia.
He stated that the fund will eliminate the tax obligations that come with direct bitcoin ownership.
“By gaining exposure through a PIE (portfolio investment entity) fund, a well-known investment vehicle, we’re eliminating those pain points, while providing simple access to the potential that these digital assets have,” said Gardiner.
A PIE structure ensured that the fund’s units would be taxed at a fair dividend rate, while any capital gains would be tax-free.
However, investors would be taxed at their prescribed investor rate (PIR), which is capped at 28 percent, on 5% of their dividend income, and losses would not be deductible.
“This means that most investors pay a maximum 1.4 percent in tax each year, regardless of what happens to the performance of the underlying assets,” Gardiner said.