Harvest HBLK ETF Review 2021: A Blockchain ETF for Canadians

The technology sector has been growing rapidly, and tech stocks have become the primary growth driver for stock markets worldwide. Blockchain technology is touted as a revolutionary new technology.

Also known as distributed or decentralized ledger technology, blockchain technology was made popular by the advent of cryptocurrencies.

But the revolutionary new technology has far more applications beyond the world of disruptive and decentralized digital currencies. It can innovate how governments, institutions, businesses, and individuals interact and transact.

Investors looking to become wealthier by investing in individual stocks involved with blockchain technology might find it challenging to make the right picks for their investment portfolios.

Blockchain Exchange-Traded Funds (ETFs) can provide you with exposure to a diversified basket of securities involved with the technology. My Harvest HBLK ETF review might help you identify a fund that helps you get the exposure to blockchain companies you seek.

Our Verdict
Harvest HBLK ETF Review 2021
8/10Our Score

Harvest HBLK ETF

Invest In Blockchain Technology

Gain diversified exposure to a basket of large-cap established companies and standalone blockchain companies through an ETF that tracks the Harvest Blockchain Technologies Index.

Pros
  • Low-cost ETF
  • World’s first blockchain technology ETF
  • Diversified exposure to blockchain-related businesses
  • Safer investment than cryptocurrency ETFs
Cons
  • Does not invest in fixed-income securities
  • Prone to greater volatility

What Is Harvest HBLK ETF?

Harvest Blockchain Technologies ETF (HBLK) is a fund managed by Harvest Portfolios Group, and it stands tall as the world’s first blockchain ETF. There have been several attempts at creating blockchain ETFs before and in recent times, but Harvest HBLK ETF is one of the oldest left standing.

The fund tracks the performance of the Harvest Blockchain Technologies Index, investing in equity securities of issuers who are exposed to the development and implementation of blockchain technology, either directly or indirectly.

Having first launched in February 2018, Harvest HBLK is over three years old at writing and boasts Assets Under Management (AUM) of $55.8 million as of September 30, 2021.

A purely equity-centric fund, Harvest HBLK ETF carries a relatively higher degree of capital risk compared to funds that also diversify into other sectors and fixed-income assets.

What Does Harvest HBLK ETF Invest In?

Blockchain Technology

Harvest HBLK ETF tracks the Solactive Harvest Blockchain Technologies Index. The underlying index focuses on leading publicly listed companies that have business activities focused on blockchain technology throughout North America.

As of September 30, Harvest HBLK ETF holds 46 equity securities, out of which 36 of them are dedicated blockchain holdings that account for 74% of its total asset allocation.

The fund invests the remaining 26% of its assets in 10 large market capitalization companies that have an indirect involvement in the development and implementation of the disruptive technology.

Considering the nascent stage for the technology, the underlying fund is designed to transition to transform from a combination of established blockchain tech companies and dedicated blockchain companies into being focused entirely on the dedicated blockchain segment as the sector develops and grows.

One important thing to note is that since this is a 100% equity-focused fund, Harvest HBLK ETF carries a high-risk rating.

Harvest HBLK ETF Asset Allocation

Typically, this section of my Harvest HBLK ETF review would have outlined the asset allocation split the fund offers you between stocks and fixed-income assets like bonds and GICs.

However, Harvest HBLK ETF allocates the entirety of its assets to equity securities of publicly listed companies in North America involved directly or indirectly with blockchain technologies.

The asset allocation split for the fund lies in the proportion of funds allocated to established and emerging companies.

sub allocation

The fund does offer diversification within the blockchain sector by allocating around a quarter of its assets to large market capitalization stocks while the rest is invested in emerging equity securities.

Harvest HBLK ETF Top Holdings

This section of my Harvest HBLK ETF review will discuss the top holdings for the fund.

Top holdings

Harvest HBLK ETF focuses on investing in companies with business involvement with blockchain technology.

The fund invests in a total of 46 equity securities, with 26% of the assets allocated to ten large market capitalization companies with some involvement in disruptive technology and 74% to 36 emerging businesses dedicated to blockchain technology.

Its top holding is Nuvei Corporation, accounting for 8.9% of its asset allocation. EPAM Systems Inc. comes in second with a 7.6% asset allocation, and Akamai Technologies, Inc. accounts for 7.3% of its asset allocation. Nuvei Corp. is the only Canadian equity security among its top ten holdings.

Harvest HBLK ETF MER And Fees

Bill receipt

Harvest HBLK ETF is a passively managed fund because it seeks to replicate the performance of an underlying index, regardless of how individual securities held within the index perform on the stock market.

The fund manager only rebalances the portfolio to align its holdings to reflect any changes in the underlying index, making it a low-cost fund.

The management fee for Harvest HBLK ETF is 0.65%, and its Management Expense Ratio stands at 0.98%. Despite being a passively managed fund, Harvest HBLK ETF does charge a higher fee and MER than most low-cost ETFs.

However, it charges a considerably lower fee than mutual fund products that might offer similar benefits and features in Canada.

Mutual funds in Canada typically charge more than 2% in fees. ETFs like Harvest HBLK ETF provide hands-off investors like you with a much lower-cost solution through its lower MER.

Harvest HBLK ETF Performance And Returns

Since Harvest HBLK ETF tracks the performance of the Solactive Harvest Blockchain Technologies Index, it is easy to see that the fund’s performance is virtually identical to the underlying index.

Cumulative Growth

The chart above shows a hypothetical performance of $10,000 invested in the fund since its inception. Harvest HBLK ETF did not provide its investors much in terms of capital gains until over two years after its inception. The fund remained under for the longest time before suddenly spiking past the halfway mark in 2020.

spiking past

As of September 30, 2021, $10,000 invested in Harvest HBLK ETF since its inception would be worth $24,176, reflecting a 27.32% growth of invested capital since the fund’s inception. Most of the gains posted by the fund came last year.

Harvest HBLK Dividend Yield

Harvest HBLK ETF is a fund designed to provide you with exposure to the performance of equity securities of a diversified basket of tech firms involved directly or indirectly with the development and implementation of blockchain and decentralized ledger technologies.

The underlying index focuses on publicly traded blockchain technology companies in North America, aiming to provide you with wealth growth through capital gains of its constituent securities.

It means that Harvest HBLK ETF does not offer much in terms of shareholder dividends like many other ETFs. But that does not mean that your returns from investing in the fund are limited to capital gains. The fund distributes dividends to its unitholders every year if any.

As of October 1, 2021, its annualized distribution yield is 0.00% since it has not distributed any shareholder dividends. The fund has yet to distribute any dividends since its inception, and shareholder returns have been limited to capital gains as of writing.

Harvest HBLK ETF Alternatives

alternatives

This section of my Harvest HBLK ETF review will discuss a few alternatives you can compare the fund with.

The comparison can help you make a better-informed decision about whether the fund is the most suitable way to gain exposure to a diversified basket of equity securities of tech firms directly or indirectly involved with blockchain and distributed ledger technologies.

HBLK Vs. BLOK

Amplify logo

BLOK is an actively managed ETF issued by Amplify ETFs that seeks to provide its investors with a total return by investing at least 80% of its assets in equity securities of companies with active business involvement in developing and implementing blockchain technologies.

Unlike Harvest HBLK, BLOK ETF does not track the performance of an index. However, it comes with a lower MER of 0.71% compared to 0.98% for HBLK ETF. BLOK provides more geographical diversification

BLOK ETF also provides significant exposure to the cryptocurrency world by allocating 24% of its funds to cryptocurrency mining companies, making it a riskier investment than HBLK ETF.

HBLK Vs. HBGD

horizons logo

Horizons HBGD ETF is a passively managed fund like Harvest HBLK ETF. Issued by Horizons ETFs, HBGD ETF seeks to track the performance of the Solactive Big Data & Hardware Index, net of expenses.

The underlying index tracks a globally diversified portfolio of companies that focus on data development, storage, and data management-related services and solutions. It also focuses on companies that offer hardware and hardware-related services that are used in data-intensive applications like blockchain technology.

Horizons HBGD comes with an MER of 0.55%, making the fund significantly more affordable than HBLK ETF, and it offers global diversification. Harvest HBLK ETF does not diversify outside of North American publicly listed companies.

It could be a viable alternative to HBLK ETF if you seek geographical diversification and lower-cost exposure to blockchain-related companies.

How To Buy Harvest HBLK ETF In Canada

You can invest in Harvest HBLK ETF in Canada through most Canadian brokerage platforms that offer stock and ETF trading. My top choices are Wealthsimple Trade and Questrade.

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Wealthsimple Trade
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Questrade
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To learn more, check out my full breakdown of the best trading platforms in Canada here.

Our Final Verdict: Is Harvest HBLK A Good Investment For You?

Blockchain technology undoubtedly has far more utility beyond the cryptocurrency world that brought distributed ledger technology to the mainstream.

The revolutionary technology is changing the world by facilitating better record-keeping and smart contracts as its architecture does not rely on centralized nodes.

The technology’s enthusiasts claim that it can reduce overall transaction costs while decentralizing the ecosystem of an industry. While the thesis remains to be proven in several industries, the potential is there.

Harvest HBLK ETF provides you with exposure to equity securities involved directly or indirectly with the implementation and development of the new technology. If you have a bullish long-term view of blockchain technology, it could be a viable long-term investment for you to consider.

If you are interested in getting more diversified exposure to tech-related ETFs, my guide to the Best Tech ETFs In Canada lists down some of the top low-cost ETFs that you could consider.

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Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.

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