US-based financial institution BNY Mellon, the world’s largest custodian and asset services company, argues that the recent performance of one of its exchange-traded funds, or ETFs, was significantly impacted by the lack of exposure to companies operating in Investing Bitcoin.
The BNY Mellon Opportunistic Small Cap Fund (DSCVX) gained 35% from September 1, 2020 to February 28, 2021, underperforming its benchmark, the Russell 2000 Index, which produced about 41.7% over the same period.
Filings with the U.S. Securities and Exchange Commission show that the company regrets not buying shares in leading business intelligence firm MicroStrategy (MSTR) – which invested billions in Bitcoin last year, holdings that have since grown to more than $ 4. 8 billion. The filings state:
“The fund’s performance was also affected by a decision not to own MicroStrategy, whose stock surged when it announced it had invested in Bitcoin.”
The document also notes that the fund’s position in gold mining company Alamos Gold “hampered performance as stocks were hurt by the weak gold price.”
According to ETF.com, 88 ETFs are currently exposed to MicroStrategy, including the sixth strongest performing fund of 2021 to date, the Amplify Transformational Data Sharing ETF (BLOK) – which is highly exposed to crypto companies and is the second largest holder of MSTR through percentage allocation with 5.20% of the portfolio invested in Microstrategy.
On average, US-based ETFs have allocated 0.57% of their capital to MicroStrategy.
Since announcing its first Bitcoin investment in August 2020, MicroStrategy has amassed $ 2.2 billion in BTC – increasing the company’s crypto inventory by 120%.
Over the same period, MSTR’s price has skyrocketed 385% at the time of writing, from $ 135 to $ 655. In early February, MSTR was trading at record highs above $ 1,270.
BNY’s small-cap ETF typically invests at least 80% of its assets in stocks of low-capitalization companies from the Russell 2000 Index. Some of the fund’s largest allocations include North American airline SkyWest, corporate cloud provider Cloudera, and healthcare provider Acadia. About 23% of investments are in the industrial sector, 17.5% in healthcare, 15.9% in technology and 14.2% in financial services
After opening 2020 trading at around 27.5%, DSCVX crashed to a low of $ 16 in March as the economic impact of the coronavirus became apparent worldwide. Since then, the fund’s price has more than doubled to trade for more than $ 37.
Despite regretting its Opportunistic Small Cap Fund’s lack of MSTR exposure, BNY Mellon is making significant investments in the crypto sector, leading the $ 133 million Series C funding round from institutional crypto custodian Fireblocks last month.
In February, BNY Mellon also announced plans to offer Bitcoin custody services.