It’s been a while now that Cryptocurrency has become the talk of the town.
Since it’s become so popular, it is important to talk about it and address client needs. When I say client needs, I mean people asking me what I think of Crypto and if there are any providers out there that invest in the commodity?
It started with NZ Funds last year when they dipped their toes in the cryptocurrency market and added some Bitcoin to their KiwiSaver portfolios and now Kōura has also joined the ranks.
Kōura has gone beyond what NZ Funds did last year and created a whole new fund category with only Bitcoin as an asset.
The way it works is that investors choosing Kōura as their KiwiSaver provider can allocate a maximum of 10% to a KiwiSaver Fund containing Bitcoin and its derivatives as assets. The reason that there is a maximum allowance of 10% is because cryptocurrency remains a highly volatile commodity and it is not advised to have a whole portfolio composed of only this particular class of asset. You need to have that diversification in there and spread your metaphorical eggs into more than one metaphorical basket. It’s just good practice. It is particularly important as you are nearing retirement or close to that first home deposit goal as you don’t want to encounter a big drop in your balance all of a sudden and have to wait for it to come back up while your goal gets pushed back further into the horizon.
There is also the issue of ‘mining’ Bitcoin and its derivatives. It takes a lot of energy to run the processing plants that keep Bitcoin going, i.e. the computers with a large processing power that need to be continuously running in order to keep cryptocurrency available. This results in significant carbon emissions. Kōura purchased carbon credits to offset carbon emissions and remain relatively neutral in their overall position. Part of the fees this fund charges is allocated for this purpose. The rest goes towards the high cost of infrastructure needed for cryptocurrency investments, according to Kōura representatives.
The fee for this fund is expected to be 1.1%, considerably higher than the flat fee of 0.63% that Kōura charges across its other types of funds. Carlyon, CEO of Kōura, says that it’s still “pretty good value” considering similar funds in the US charge anywhere between 0.95% and 2.5%.
Kōura has different funds and allows its members to create their own portfolio. While this option might be useful to the DIY investor who has researched the funds in depth, it is highly recommended that you speak with a financial adviser about what strategy is best for you.
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