Morgan Stanley’s Bitcoin ETF Launches as a New Vampire Fund Rises from the Crypt(o)

Do Staten Island’s gang of misfit nosferatu Nadja, Laszlo, Nandor or Colin Robinson from the mockumentary What We Do in the Shadows even care about crypto?

There’s a new ETF that is a creature of the night, trading in futures, options and other exchange-traded products. During the day, the Nicholas Bitcoin and Treasuries AfterDark ETF (NGHT) goes to sleep, holding short-duration Treasurys and cash. Meanwhile, investors can get their diurnal bitcoin fix via any number of funds now on the market, most recently Morgan Stanley’s ETP, which undercut the competition on price by at least a basis point. Both of the new products launched Wednesday. 

Making the case for bitcoin exposure overnight, David Nicholas, CEO of Nicholas Wealth’s XFunds, points to returns for the iShares Bitcoin Trust of 200% since inception through March, during non-US trading hours, while intraday prices were down 50%. “All of the gains for IBIT can be accounted for in the overnight hours,” he said. Overall, IBIT has climbed  about 66% since it started trading.

Out All Night

Some investors will probably be intrigued by this and at least supplement their spot bitcoin fund exposure with NGHT. That may not keep BlackRock up at night, but Morgan Stanley’s fund has the potential to divert some market share away from the $56 billion industry leader. After all, the Morgan Stanley Bitcoin Trust charges a slim 14 basis points, compared with IBIT’s 25 (the Nicholas Wealth fund charges 97). It also has the benefit of being in front of the company’s 16,000 advisors. “Our platform has historically been based very much on a wirehouse/RIA perspective,” said Ally Wallace, global head of ETF strategy at Morgan Stanley Investment Management. “This is really our first product that goes after all the client segment channels.” And regarding price, “We definitely wanted to come out with a lower expense ratio to show the commitment to raising assets in the space.”

That fund is among the most successful launches so far this year:

• Its trading volume came in at $34 million and a reported $30 million in net inflows on its first day, several crypto publications reported.
• “We’re definitely happy with it,” Wallace said. “We were all pleasantly surprised by it.”

Vampire Weekday: While the debut of Morgan Stanley’s fund is the biggest event in spot bitcoin since IBIT, the Nicholas fund has broader implications. Until recently, diversification was something investors thought about only across asset classes, Nicholas said. With NGHT, along with ETFs that could use tokenization to trade at all hours, time diversification is also something to consider, he said. For bitcoin in particular, there is some natural profit-taking that happens in the morning, following strong appreciation at night, which is part of why after-hours returns have been stronger over time, he noted. “It makes sense to have some allocation to night,” he said. “It gives you that time diversification, which is a whole new way to think about investing.”