Coinbase Makes Its Index Fund More Attractive to Institutional Investors by Halving Its Fee

On Monday (13 August 2018), Coinbase announced that it was reducing the annual management fee for its Index Fund from 2% to 1% for both existing and new investors.

This is the reason Coinbase gave for reducing the management fee:

“We’re reducing our fee in order to attract investors who are familiar with lower-fee index funds in other asset classes. This will help introduce a new category of institutional investors into the cryptocurrency space.”

Coinbase also said that Ethereum Classic (ETC), which it had added launched on Coinbase Pro last week (on 7 August 2018), had been added to the index fund:

“Coinbase Index Fund has also been rebalanced to include Ethereum Classic, following its listing on Coinbase this week. All investors now have exposure to Ethereum Classic. The fund will continue to add new assets when they are listed on Coinbase.”

Coinbase Index Fund invests in crypto assets in proportion to their weighting in Coinbase Index:

“Each time that an investor invests in the fund, the fund deploys the investor’s capital by buying assets in proportion to their weighting in the index. When an investor wants to leave the fund, the fund can sell assets in proportion to their market weighting in the index at that time, and return the proceeds to the investor. Subscriptions and redemptions occur monthly, with a 30 day notice required for redemptions.”

Coinbase Index Fund, which is currently only available to U.S. accredited investors, is run by Coinbase Asset Management, Inc. and Coinbase Fund Manager, LLC. which are affiliated entities of Coinbase, Inc.

Reuben Bramanathan, who is the Product Lead at Coinbase Asset Management, had this to say on Twitter about today’s news:

We’re serious about getting new investors into crypto, through products that are accessible, familiar and easy to understand. This will also bring us one step closer to our mission of creating an open financial system for the world.

— Reuben Bramanathan (@bramanathan) August 13, 2018

For people who are already familiar with crypto, there are plenty of great products like @CoinbasePro, @ParadexIO, @Trezor, @LedgerHQ and @MyCrypto. But at this stage, many new investors still prefer a well-understood fund structure run by a trusted manager.

— Reuben Bramanathan (@bramanathan) August 13, 2018

As the investment infrastructure for crypto continues to mature, we’ll see more investors get comfortable managing their own crypto. But as we all know, the first step is getting some skin in the game. We’re here to help investors start that journey 🙂

— Reuben Bramanathan (@bramanathan) August 13, 2018

Featured Image Credit: Image Courtesy of Coinbase Asset Management