Los Angeles-based digital asset manager Wave Financial is introducing the “Wave BTC Income & Growth Digital Fund,” the first crypto derivatives-based yield fund on the market.
According to the announcement, Fidelity Digital Assets will custody the fund’s Bitcoin holdings.
Wave Financial CEO David Siemer notes,
“The mission of Wave is to provide investors with diversified exposure to crypto assets. This is an alternative way to hold BTC exposure.”
Incorporated in the British Virgin Islands, the fund generates yield by selling call options on Bitcoin held by the asset management firm.
Call options are financial contracts that grant buyers the right to buy an asset during a specified time period and at a designated price – without any obligation.
According to the press release,
“The Fund expects such option sales to generate attractive premiums due to BTC’s high volatility, which should provide a stream of income that can be paid out monthly.
The fund aims to distribute a dividend of 1.5% of NAV [net asset value] per month, which, if achieved, would result in an 18% target annual yield. Excess premium above the target yield, minus a performance fee, would be credited back to the Fund to purchase more BTC, contributing to the growth of NAV.”
The fund will sell call options with strikes above the market price in order to generate this premium, the release notes. Traders might also be able to capture potential BTC upside.
Wave Financial President Ben Tsai says,
“For high net worth investors, appetite for innovative yield product 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.”
The Wave BTC Income & Growth Digital Fund will be issuing its own tokens “based on cryptographic technologies,” the release states.
The high-risk fund and its tokens are only available to investors outside the US and to non-US individuals in compliance with Regulation S under the Securities Act of 1933. However, accredited US-based investors may qualify to invest.