Los Angeles-based Wave Financial has introduced a cryptocurrency derivatives-based yield fund, called the Wave Bitcoin (BTC) Income and Growth Digital Fund.
The fund will issue tokens based on cryptographic technologies that are similar to those used for issuing and transferring blockchain-based currencies, according to a press release.
Wave’s management said that the tokens would be available for trading on alternative exchnage platforms in the foreseeable future.
Managing partner at Wave Financial Benjamin Tsai noted:
“I think what was missing in the crypto market is a lot of very solid traditional types of products, but with crypto assets.”
Tsai, who’s also the co-founder and CFO at LA Blockchain Lab, explained:
“For high net worth investors, the appetite for innovative yield products with upside potential is strong. This product monetizes higher volatility of BTC to deliver yield, independent of the interest rate environment, while keeping some upside exposure.”
After completing an extensive due diligence process, Fidelity Digital Assets will be providing custody for the fund.
The initiative’s goal is to develop products based on traditional funds while tapping into the new digital asset market.
CEO of Wave David Siemer remarked:
“The mission of Wave is to provide investors with diversified exposure to crypto assets. This is an alternative way to hold BTC exposure.”
The Wave fund aims to generate income with the premium earned from selling call options with strikes 20% greater than the current trading price at the time. The fund intends to distribute dividend that is 1.5% of the asset value of the total amount of Bitcoin held, which could result in an 18% annual return on investment.
The Bitcoin income fund charges 100 basis points (annually) for management and also takes 30% of returns over the 18% yield. The remaining amount is invested back into the fund.
The new fund is open for subscriptions, however, investors have not yet confirmed whether they’ve subscribed.
Tsai noted:
“We have a number of investors that have expressed interest and we are working to get them the actual private placement memorandum and subscription agreement.”
As mentioned in the release, investment in the funds and its token is suitable only for professional investors who have prior experience in dealing with private funds and are also familiar with investing in crypto assets.
The release further stated that the fund and its tokens are only available to investors based outside the US and to non-US persons, which is in compliance with Regulation S under the Securities Act of 1933.
However, accredited investors in the US may purchase the fund.