Portfolio Construction

What you actually own: ETPs, funds and the access decision

Getting exposure to digital assets is no longer the hard part. With well over a hundred further exchange-traded products awaiting approval, the allocator's problem has shifted from access to selection. This note sets out what each route — listed product, fund, fund of funds, mandate, direct holding — actually gives you, where a listed product is genuinely the right answer, and what it structurally cannot do.

Manuel E. De Luque MuntanerCEO & Founder

17 August 202610 min read

Key takeaways

The access problem is solved and the selection problem has replaced it. Bloomberg Intelligence has counted at least 126 further crypto exchange-traded product filings pending, with the regulator reviewing dozens of applications across more than twenty tokens.
For plain, liquid, directional exposure to the largest assets, a listed product is often the right answer — cheaper, simpler and operationally cleaner than the alternatives. Saying so is not a concession; it is the starting point for an honest comparison.
What a listed product cannot structurally do is short, run market neutral, select among managers, or reach capacity-constrained strategies that do not accept money through a listed wrapper. Those are different return sources, not better versions of the same one.
Flows have been anything but a straight line. Bitcoin exchange-traded funds saw around $5.4 billion of net outflows in the first half of 2026 — the first negative half-year since launch — before recovering in August, while Ethereum products outdrew them for the first time in July.
The cost that decides the outcome is rarely the headline fee. Tracking, premium and discount to net asset value, counterparty and collateral arrangements, rebalancing timing and securities lending policy usually matter more, and none of them appear in a fee comparison.

The menu filled up

For most of this asset class's history the practical obstacle for an institution was access. Custody was immature, counterparties were unfamiliar, and the operational path from an investment committee decision to a held position was genuinely difficult. That problem has largely been solved, and quickly.

It has been replaced by a different one. Bloomberg Intelligence has counted at least 126 further crypto exchange-traded product filings pending with the US regulator, with applications outstanding across more than twenty separate tokens. One analyst's characterisation — that issuers are throwing a lot of product at the wall — is uncharitable but not obviously wrong. A market that had a handful of listed vehicles two years ago is heading towards having a great many.

That changes the nature of the decision. When there is one way in, the question is whether to allocate. When there are a hundred and thirty, the question is which one, in what wrapper, holding what, with which counterparties — and that is a selection problem, which is a different discipline from an access problem and requires different work.

What you actually own in each case

The wrappers are routinely discussed as though they were interchangeable routes to the same exposure. They are not. What differs is the legal right you hold, who holds the asset, what you can do with the position and what happens if something fails.

A listed exchange-traded product — you own a security that tracks an asset, held in your existing brokerage and custody arrangements, priced continuously and settled on conventional market infrastructure. Depending on the structure, your claim may be on a trust holding the asset or a note issued against collateral, and that distinction matters more than the ticker suggests.
A fund — you own units in a vehicle with a manager, a depositary, an administrator and a prospectus setting out what it may hold. You get a defined strategy and defined redemption terms, at the cost of dealing frequency and a higher minimum.
A fund of funds — you own units in a vehicle whose portfolio is other managers. You are buying selection, diligence and access, not a market. The relevant question is whether that selection adds more than the second layer of fees costs.
A managed account or mandate — the assets remain yours, held in your own name with your own custodian, with a manager directing them under your guidelines. Maximum control and transparency, considerable operational burden, generally a large minimum.
A direct holding — you own the asset itself and everything that comes with it: custody, key management, counterparty selection, tax and accounting treatment, and the entire operational risk surface.

When a listed product is the right answer

It is worth stating this plainly, because a manager writing on this subject has an obvious incentive not to.

If what you want is directional exposure to the largest and most liquid digital assets, expressed in a vehicle your existing operations can hold without modification, then a listed exchange-traded product is very often the correct choice. It is cheaper than the alternatives, it settles in infrastructure your team already understands, it requires no new custody relationship, it can be sized and unwound daily, and its governance question — can we hold this instrument — is one your committee has answered a hundred times before for other assets.

An allocator who wants beta should buy beta in the cheapest compliant form available. Paying an active fee for exposure that tracks an index is a poor trade regardless of how the strategy is described, and the fact that an asset class is unfamiliar does not change that arithmetic.

The useful question is therefore not which wrapper is better. It is what you are actually trying to own — and whether that thing is available in a listed form at all.

What a listed vehicle cannot structurally do

Several things an institutional allocator may want are not available in a listed wrapper, and not because issuers have not got round to them. They are excluded by the structure.

Non-directional return — a product that tracks an asset delivers that asset's return, including the whole of its decline. Market neutral and relative-value approaches seek returns from the relationship between instruments rather than from direction, which requires shorting, leverage and active position management that a tracking wrapper is not built to house.
Manager selection — the dispersion between managers in this asset class is wide, and choosing among them is a research function, not a product feature. No listed vehicle performs that work on your behalf.
Capacity-constrained strategies — the strategies with the least crowded opportunity sets are frequently the ones that close to new money, cap their size, or decline to be distributed through a listed wrapper at all. Availability and quality are not correlated, and are sometimes inversely so.
Diversification across return sources — a portfolio of twelve listed products tracking twelve tokens is not diversified in any meaningful sense; it holds twelve expressions of the same directional risk factor. Genuine diversification comes from combining different sources of return, which is a construction decision rather than a purchasing one.
Anything requiring discretion under stress — a tracking product does exactly what it says during a drawdown, which is the point of it. If you want a position that can be defended, hedged or reduced according to a process, that process has to live somewhere, and it does not live in the wrapper.

Flows have not been a straight line

The listed route has been widely described as an unbroken institutional advance. The record does not support that reading, and an allocator relying on it is relying on a story rather than data.

Bitcoin exchange-traded funds recorded approximately $5.4 billion of net outflows over the first half of 2026 — reported as the first negative half-year since these products launched in January 2024. In July, Ethereum products drew around $365 million against roughly $205 million for Bitcoin products, the first month in which the former outdrew the latter and, for Bitcoin, the weakest monthly figure on record.

August then supplied a compact demonstration of how quickly this can turn. One week brought roughly $854 million of inflows, the strongest since April; the next took roughly $390 million back out, the largest weekly outflow in six weeks. That is a swing of more than $1.2 billion in the space of seven days, against a price that barely moved. Ethereum products, which had drawn inflows for five consecutive weeks, turned marginally negative in the same period.

Two readings follow, and both are useful. The first is that the listed wrapper transmits sentiment quickly in both directions: a billion-dollar reversal in a week, with the underlying price broadly unchanged, is the clearest evidence available that easy access works as efficiently on the way out as on the way in. Convenience is not a one-way property. The second is that institutional interest is rotating within the asset class rather than simply accumulating, which is itself a sign of a maturing allocator base making relative decisions rather than a single directional one.

Neither reading is a forecast, and none of these figures says anything about where the market goes next. They are context for a structural point: the vehicle you choose shapes how quickly your own capital, and everyone else's, can move.

The European route

Most published commentary on access is written from a United States perspective, where the listed product landscape is largest and the regulatory news flow loudest. A European allocator faces a materially different set of options and constraints, and the position has been changing.

The European Union's markets-in-crypto-assets regime has moved out of its transitional phase: the grandfathering window under which existing service providers could continue operating ran to 1 July 2026, or until their authorisation was granted or refused, whichever came first. In July 2026 the European regulator published further guidance addressing, among other things, where advice under the crypto-asset regime sits relative to the existing markets-in-financial-instruments framework, the treatment of crypto-asset lending, and the position of authorised providers offering custody, administration and transfer.

One boundary is worth understanding clearly, because it is frequently misread. Financial instruments registered through distributed ledger technology remain subject to existing European securities law and are not crypto-assets under the crypto-asset regime — the point our note on tokenisation made from the other direction. The technology does not determine the regulatory treatment; the nature of the instrument does.

For an allocator the practical consequence is that the question 'is this regulated?' is too coarse to be useful. The questions that matter are which entity is authorised, for which activity, in which jurisdiction, and whether that authorisation covers the specific risk being taken. Those have different answers in Luxembourg, in the United States, and in the offshore jurisdictions where a good deal of this product is still domiciled.

The costs that are not in the fee

Access routes are usually compared on headline fee, which is the most visible cost and rarely the one that determines the outcome.

Tracking difference — what the vehicle actually delivered against what it tracks, over time. A low fee with persistent tracking drag is not a low-cost product.
Premium and discount — a listed vehicle can trade away from the value of what it holds, particularly in stressed conditions. You transact at the price, not at the net asset value.
Counterparty and collateral — whether your claim is on assets held in trust or on an issuer against posted collateral, and what happens to you if that issuer fails.
Rebalancing and roll — when and how the vehicle adjusts, and whether that timing is public enough to be anticipated by others trading ahead of it.
Lending policy — whether the underlying assets are lent out, to whom, against what collateral, and who receives the revenue.
Your own operational cost — the reporting, reconciliation, valuation and governance burden the route imposes on your team, which is real even though it never appears in a fee table.

Block Asset Management

How Block Asset Management sees the access decision

We are not a substitute for a listed product, and we do not try to be. Our work begins where a tracking wrapper stops — in return sources that require selection, discretion and structure, and in the diligence that tells you whether a manager deserves the allocation.

Honest about where we do not add value

For plain directional exposure to the largest digital assets, the cheapest compliant route is usually the right one. We would rather say that than sell an expensive version of the same thing.

Return sources a wrapper cannot hold

Market neutral and systematic approaches seek returns from relative performance and rules-based signals rather than from direction — an approach we set out in our notes on market neutral strategies and on systematic versus discretionary investing.

Selection as the product

In our fund of funds strategies the investment and operational due diligence process is the thing being bought, and we set out how it works in our note on due diligence in a digital asset fund of funds.

Structure examined before strategy

When we assess any vehicle we look first at what is legally owned, who holds it, how it is valued and what happens on a failure — the same questions we would want an allocator to ask us.

A Luxembourg vantage point

As a Luxembourg-domiciled manager we work within the European framework, which shapes how we read questions of authorisation, investor protection and what a European allocator can practically hold.

The proliferation of listed products is good for the asset class and good for allocators. It has driven down the cost of the simplest exposure, brought the operational path within reach of institutions that could not previously take it, and removed the excuse that access was too difficult.

What it has not done is answer the harder question. A wrapper is a delivery mechanism, not an investment decision, and the decision it delivers still has to be made: what return source you are trying to own, whether it exists in a listed form, what you give up if you take the convenient route, and what you take on if you do not. A firm that cannot tell you when its own product is unnecessary is not a firm that has thought about the question.

If your organisation is weighing how to implement a digital asset allocation, our investor relations team would be glad to discuss the trade-offs. Professional and qualified investors can also register for access to our detailed strategy materials.

Important information

This material is provided for information purposes only and is intended for professional and qualified investors. It is commentary on investment structures, market conditions and regulation, and is not legal, tax or investment advice, nor an offer, solicitation or recommendation of any strategy, financial instrument, vehicle or service. Nothing here is a recommendation of, or a comparative assessment of the merits of, any specific product or issuer. Market and flow data referenced is drawn from publicly reported sources, is approximate, relates to the periods stated and may since have changed; it does not refer to the performance of any Block Asset Management strategy. Descriptions of regulatory frameworks are general and are not a statement of the applicable law in any jurisdiction. Digital assets are volatile and involve significant risk, including the possible loss of the entire amount invested. Past performance is not a reliable indicator of future results.

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