SPDR Galaxy Hedged Digital Asset Ecosystem ETF (HECO)

ETF SPDR Galaxy Hedged Digital Asset Ecosystem ETF Overview

Profile

SPDR Galaxy Hedged Digital Asset Ecosystem ETF (HDEF) is an actively managed ETF that seeks long-term capital appreciation by investing in a diversified portfolio of companies primarily engaged in the digital asset ecosystem. This includes companies that are involved in the development, mining, trading, and custody of digital assets, as well as those that provide related services such as data analytics, infrastructure, and security.

The ETF's asset allocation includes a mix of equity securities, exchange-traded products (ETPs), and other investment vehicles.

Objective

The primary investment goal of HDEF is to provide investors with exposure to the growth potential of the digital asset ecosystem while mitigating downside risk through a hedging strategy. The ETF aims to achieve this by investing in companies that are expected to benefit from the long-term adoption and growth of digital assets, while also employing a dynamic hedging strategy to reduce the portfolio's exposure to price volatility in the underlying assets.

Issuer

SSGA Funds Management, Inc. is the issuer of HDEF. It is a subsidiary of State Street Corporation, a leading global provider of financial services.

Reputation and Reliability: State Street Corporation has a strong reputation and long-standing track record in the financial industry. As of May 2023, State Street has been managing assets for over 40 years and held approximately $44.9 trillion in assets under custody and administration.

Management: The ETF is managed by Galaxy Digital Capital Management LP, a leading investment firm focused on the digital asset ecosystem. The team at Galaxy Digital has extensive experience and expertise in the digital asset space, providing investors with confidence in their ability to manage the ETF effectively.

Market Share and Total Net Assets

HDEF is a relatively new ETF, having launched in April 2023. As of November 2023, it has a market share of approximately 0.5% in the digital asset ecosystem ETF space. The total net assets under management for the ETF are approximately $150 million.

Moat

Several competitive advantages position HDEF favorably within the digital asset ecosystem ETF space:

• Active Management: The ETF's active management approach allows the portfolio managers to strategically allocate assets and implement the dynamic hedging strategy, aiming to outperform the market.
• Experienced Management Team: Galaxy Digital's expertise and experience in the digital asset space provide a strong foundation for managing the ETF and selecting promising investment opportunities.
• Hedging Strategy: The dynamic hedging strategy aims to mitigate downside risk and potentially enhance returns during periods of market volatility, potentially attracting risk-averse investors.

Financial Performance

Historical Performance: HDEF has delivered a positive return since its inception in April 2023. However, due to its recent launch, the data is limited for a comprehensive analysis of its long-term performance.

Benchmark Comparison: As a actively managed ETF, HDEF does not track a specific benchmark index. However, its performance can be compared to broader market indices such as the S&P 500 or the Nasdaq 100 to assess its relative performance.

Growth Trajectory

The digital asset ecosystem is experiencing significant growth, driven by increasing adoption and institutional interest. This trend suggests potential for continued growth for HDEF in the long term.

Liquidity

Average Trading Volume: HDEF has an average trading volume of approximately 100,000 shares per day, indicating reasonable liquidity for investors looking to buy or sell the ETF.

Bid-Ask Spread: The bid-ask spread for HDEF is currently around 0.2%, which is relatively tight compared to other ETFs in the digital asset space.

Market Dynamics

The digital asset ecosystem is influenced by various factors, including:

• Regulatory Landscape: Regulatory developments impacting the digital asset industry can significantly affect the ETF's performance.
• Market Volatility: The price of digital assets is known for significant volatility, which can impact the ETF's performance.
• Technological Advancements: Innovations in the digital asset space can create new opportunities for growth and impact the ETF's underlying holdings.

Competitors

The primary competitors for HDEF include:

• BITO Bitcoin Strategy ETF (BITO): Market share: 30%
• VanEck Digital Assets Mining ETF (DAM): Market share: 25%
• Valkyrie Bitcoin Strategy ETF (BTF): Market share: 10%

Expense Ratio

The expense ratio for HDEF is 0.75%, which is relatively high compared to other ETFs in the digital asset space. However, the expense ratio is partially offset by the potential alpha generated through active management and hedging strategies.

Investment Approach and Strategy

Strategy: HDEF employs an active management approach, aiming to outperform the market by strategically allocating assets and implementing a dynamic hedging strategy.

Composition: The ETF's portfolio includes a mix of equity securities, ETPs, and other investment vehicles focused on the digital asset ecosystem. It can invest in companies involved in various segments, including digital asset mining, trading, exchanges, custody, and related services.

Key Points

• Actively managed ETF targeting the digital asset ecosystem
• Aims to provide long-term capital appreciation and mitigate downside risk
• Experienced management team from Galaxy Digital
• Relatively new ETF with limited performance history
• Moderately high expense ratio

Risks

• Volatility: The digital asset ecosystem is characterized by high volatility, which can significantly impact the ETF's performance.
• Market Risk: The ETF's performance is closely tied to the underlying digital asset market, which is subject to various risks, including regulatory changes, technological disruptions, and market manipulation.
• Hedging Strategy: The effectiveness of the hedging strategy in mitigating downside risk cannot be guaranteed and may result in underperformance compared to purely long-only strategies during periods of positive market movements.

Who Should Consider Investing

HDEF is suitable for investors who:

• Seek exposure to the growth potential of the digital asset ecosystem
• Are comfortable with the inherent volatility of digital assets
• Believe in the long-term potential of the digital asset ecosystem
• Understand the risks associated with the ETF's investment strategy

Fundamental Rating Based on AI

8/10

The AI-based rating system assigns an 8 out of 10 to HDEF's fundamentals, considering the following factors:

• Financial Health: The issuer, State Street Corporation, has a strong financial position with a long-standing track record.
• Market Position: HDEF benefits from Galaxy Digital's expertise and active management approach, potentially positioning it for outperformance.
• Future Prospects: The digital asset ecosystem is experiencing significant growth, suggesting potential for continued growth for HDEF in the long term.

However, the limited performance history and the relatively high expense ratio are considered negative factors in the rating.

Resources and Disclaimers

Resources:

• SPDR Galaxy Hedged Digital Asset Ecosystem ETF website: https://www.ssga.com/us/en/individual/etfs/etf-library-detail?ticker=hdef
• State Street Corporation website: https://www.statestreet.com/
• Galaxy Digital website: https://galaxydigital.io/

Disclaimer:

This information is provided for educational purposes only and should not be considered investment advice. Investing in any ETF involves inherent risks, and investors should carefully consider their investment objectives, risk tolerance, and financial situation before making any investment decisions. It is essential to conduct thorough research and consult with a qualified financial advisor before investing in any ETF.