Fund risk to investors?

Bruckner

Bitcoin is very volatile and high risk. If you want to hold it its probably best that it's a small percentage of your investments. That's a given.

I have held bitcoin on a secure offline wallet. I'm now considering the relative convenience and ease of rebalancing of holding some on a fund platform.

YouInvest is one of the platforms that offers a bitcoin tracker - Tracker One XBT Provider BITCOIN XB (ISIN SE0007126024).

"Investment Objective: The Issuer was formed in January 2015 as a special purpose vehicle (in accordance with the definition in article 2 of the Commission Regulation No 809/2004) meaning that the only business of the Issuer is to issue securities. The issuer will therefore not carry out any other business. As a special purpose vehicle, the Issuer will incur costs in order to get the Certificates admitted to trading. Furthermore, there is a risk that the Issuer will not be successful in its issue of Certificates that the Issuer will not make profits, despite this being the Issuer's aim. If the Issuer becomes unsuccessful in the issuance of securities, the Issuer may cease its business activities as issuer or ultimately may become insolvent. If the Issuer becomes insolvent, the Issuer may not be able to repay parts of or investors' entire investments."

My concern is not the performance of bitcoin - I can accept that - but whether there is a significantly greater risk of loss because of holding it in this fund. 
Is this type of fund unregulated? 
Is "the issuer" the fund manager XBT Provider AB, Stockholm?
Do investors stand to lose their investment if XBT Provider AB becomes insolvent?
Is investors investments not ringfenced? 
Thanks to anyone that can explain the actual underlying risk and why. 

Linton

Tracker One XBT Provider BITCOIN XB  is a Swedish ETF.  As far as protection is concerned ETFs are much like Investment Trusts, or come to that shares in any other company.  When you buy the shares you do so in the hope that the company will meet its objectives.  If it fails to do so that is an investment risk and there is no protection for investment risks.

With what is normally termed a "fund" such as an OIEC/UT/PensionFund you pass a sum of money to a  Fund Manager to manage on your behalf.  Your money is separate from the Fund Manager's assets and if the Fund Manager fails can be passed to another Manager.  There are regulations to ensure this happens and if it doesnt you are protected to an extent.

With shares, you own the company who own the assets.  If the company fails that's your bad luck.

Bruckner

Thank you for your reply.

I understand there is an investment risk when buying an EFT as there is with investment trusts or shares.

But I can't understand why it is necessary for this EFT to have a strong risk caveat about insolvency stated in its objectives. I don't see similarly worded objectives statements on for example Vanguard Global EFTs.

I understand the asset this ETF tracks is volatile, but why is there any additional risk of insolvecy, and which entity could become insolvent, and how?

AlanP_2

The ETF is the equivalent of a "company" and like any other "company" it can end up insolvent.

They are using an associated group company to make the Bitcoin purchases, presumably they could become insolvent which would impact this ETF.

They can, or their associated company can, use derivative contracts and not just "physical digital" (if that makes any sense at all) Bitcoins to manage their business.

Vanguard Global ETFs are buying real shares in hundreds / thousands of companies hence risk is much higher with this type of ETF.

Vanguard, as one of the largest companies in the world is a lot less likely to go bust than XBT, a much smaller operation in the scheme of things.

I would also expect that if Bitcoin dropped to practically worthless then the company wouldn't be making enough income to cover its costs so could end up insolvent unless they have deep pockets and hope for an upturn in Bitcoin.