Hello,

Cryptocurrencies are becoming more and more popular and mainstream. With the increasing demand from investors for cryptocurrency-based investments into their portfolio, fund companies have developed deep understanding and expertise of cryptocurrencies, the benefits, risks, and potential for investors.

The advantages are the simple, secure, cost-effective ways to access the cryptocurrency market without the requirements of digital wallets, keys, or investment minimums. However, these funds are typically high risk with significant volatility due to the nature of cryptocurrency and should form only a small portion of any one individual’s portfolio.  Investors must be very clear on not only what they are prepared to lose, buy what they can afford to lose, and advisors must have met their professional KYC, KYP and Suitability requirements and recordkeeping responsibilities. As historically highly volatile investments, investing in bitcoin and other cryptocurrencies is not suitable for many investors.   

HCI has approved the following funds to provide professionally managed solutions from our mutual fund company partners.

CI Bitcoin Fund
CI Ethereum Fund
Fidelity Advantage Bitcoin ETF Fund

HCI Guidelines for trading in cryptocurrency based Alternative Mutual Funds

Advisor must have Liquid Alternative Mutual Fund Proficiency
Client must have long time horizon
Client can handle volatility of returns generally associated with bitcoin and other cryptocurrencies
Concentration should not exceed of 10% of client portfolio without prior approval
Cryptocurrency based funds are not generally suitable for clients approaching or in retirement years
Cryptocurrency based funds are not generally suitable for leverage investments
No advertising or promotion of cryptocurrency investments

Cryptocurrency based funds have specific risks that advisors and clients must consider due to the nature of the investments. Below, you will find the list of risks specific to CI Bitcoin and CI Ethereum Funds.  Other cryptocurrency-based funds will have similar risks, please refer to the simplified prospectus to ensure you have a complete list and understanding of the risks.

Specific Risks for CI Bitcoin and CI Ethereum (ETH) Alternative Investment Funds (refer to Simplified Prospectus)

  • Speculative Nature of Bitcoin/ETH
  • Unforeseeable Risks
  • Access Loss or Theft
    Bitcoin/ETH Investment Risks
  • Short History Risk
  • Risks Related to the Pricing Source
  • Volatility
  • Settlement of Transactions on the
    Bitcoin/ETH Network
  • Momentum Pricing
  • Limited Use
  • Scaling Obstacles
  • Private Keys
  • Internet Disruptions
  • Gateway Protocol
  • Hijackings
  • Malicious Attacks on the Bitcoin/ETH Network
    Control of Processing Power
  • Control of Developers
  • Network Development and Support
  • Network Governance
  • ETH Irrevocable Nature of Blockchain-Recorded Transactions
  • Network Forks
  • Air Drops
  • Intellectual Property
  • Mining Incentives
  • Mining Collusion
  • Competitors to Bitcoin/ETH
  • Significant Energy Consumption to Run the Bitcoin/ETH Network
  • ETH Moving from Proof-of-Work (PoW) to Proof-of-Stake (PoS) Consensus Mechanism
  • Faulty Code
  • Unregulated Markets Venues
  • Liquidity Constraints on
  • Digital Asset Trading Platforms
  • Risk of Political or Economic Crises
  • Banking Services
  • Insurance
  • Technological Change
  • Effects of Blockchain
  • Analytics
  • Bans or Prohibitions Affecting Bitcoin/ETH
  • Control of Outstanding Bitcoin/ETH
  • Significant Increase in ETH or the Ethereum
  • Network Use
  • Demand for Bitcoin/ETH may Exceed Supply

If you have any questions regarding cryptocurrency based alternative mutual funds, please reach out to your Regional Compliance Officer.

Cheryl Hamilton
Vice President Risk Management and Chief Compliance Officer