Future of Index Funds
Drishti Bhagat Mar 17, 2021 05:00
Inspired by traditional index funds' success, Crypto20 (C20) was designed to reinvent how investors gain exposure to the broader crypto market. With cryptocurrencies long-term growth potential, an index fund is the perfect entry point for investors looking to generate exceptional returns without taking on excessive risk.
Inspired by traditional index funds' success, Crypto20 (C20) was designed to reinvent how investors gain exposure to the broader crypto market. With cryptocurrencies long-term growth potential, an index fund is the perfect entry point for investors looking to generate exceptional returns without taking on excessive risk. Historically, passively managed index funds have outperformed comparable active funds. With the crypto market’s incredible growth, it'll be interesting to compare the index funds of the future to the previous generation.
Invictus Capital’s C20 was the world's first cryptocurrency-only tokenized index fund which revolutionized investing in the crypto space. The Fund gives investors exposure to a diverse portfolio of the top 20 cryptos by market cap in a single, tradable token that can be liquidated at any time through the Invictus Investor Platform. C20 rebalances its positions weekly — a frequency optimized using data science techniques. By leveraging the efficiency enabled by the blockchain, the Fund is able to offer extremely competitive fees of 0.5% annually, whereas the industry average is 3%.
While Crypto20 was the first, Crypto10 Hedged (C10) promises to be the next evolution of crypto index funds. It has many of the benefits of the original C20 with a dynamic cash hedge that offers upside exposure and downside protection for a smoother risk-return profile. This extra downside protection makes investing in cryptos more palatable for risk-averse investors. The cash held as a hedge during market downturns is used to generate additional revenue through margin lending. This enhances the Fund's performance while at the same time effectively reducing downside risk.
Performance
Fuelled by the crypto market's explosive growth in recent months, C20 and C10 have generated phenomenal returns of 394.80% and 311.67% over the last year. In comparison, the S&P 500 also had an exceptional year by equities standards with a return of 29.25% (Yahoo Finance). The massive disparity in these funds' return potential goes to illustrate why cryptos have become so attractive to retail investors. It's possible to 4x your investment in a single year by investing in an index fund that tracks the broader crypto market. In comparison, the stable returns of traditional asset classes appear far less enticing.
Risk
Cryptos are an inherently risky asset class, so reducing volatility is vital in order to make cryptos more accessible to a wider range of investors. This is what makes Invictus's crypto index funds so appealing because they have the fundamental benefit of having a high level of diversification, together with downside protection strategies in C10’s case. C10 is at its core about managing downside risk as its cash hedge allows investors the advantage of upside volatility while aiming to protect gains during periods of market stress. Both of Invictus's crypto index funds use weekly rebalancing, and they cap the weightings of a single crypto to ensure that no one asset dominates the portfolio, further improving the portfolio's diversification. While volatility in the crypto market is unavoidable, with this volatility comes opportunity. The 30-day realised volatility for C20 and C10 are considerably higher compared to the S&P 500, which indicates a greater risk profile. For investors willing to bear this additional risk, they have the potential to generate far superior returns.
Invictus Capital has pioneered the next generation of index funds. The remarkable performance of C10 (420.40%) and C20 (153.06%) since their inception have shown that crypto index funds have a bright future ahead.
Investors can generate additional returns by staking their Invictus tokens.
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Image source: Invictus Capital Media