Non-fungible tokens (NFTs) have recently become the talk of the town, with collectible digital assets launched by celebrities being snapped up en masse by eager buyers. NFTs offering access to artwork like photographs, paintings, media and short videos are at the forefront of the trend. But for investors, the blockchain technology that encrypts the assets is more interesting than the NFTs themselves.
Apart from NFTs, another star of blockchain technology is the cryptocurrency Bitcoin. This comes as no surprise, considering it was the cryptocurrency market that first brought blockchain technology to the public’s attention.
A blockchain is an electronic database consisting of a collection of data packets or “blocks”. When a block is filled, it is connected to the next block, thus forming an unambiguous data chain. Unlike traditional databases, blockchain is decentralised, providing users or network participants with a new way to securely transmit and record information. This technological breakthrough helps reduce costs, improves efficiency and reduces fraudulent activity, thereby creating an ecosystem with a high level of trust.
Blockchain technology has four major characteristics which give it an advantage over conventional databases:
With a total market value of US$1.9 trillion1, the financial and trading power of Bitcoin cannot be underestimated. However, cryptocurrency is just one of the ways in which blockchain is being used. Today, the technology has penetrated a wide range of industries including financial services, healthcare, supply chain management and food safety, in part because of the ongoing pandemic, which has accelerated digitisation of the world, as well as the development and implementation of blockchain solutions. Market projections predict that by 2027, as much as 10% of global GDP could be stored on blockchains2. In addition, the impact of blockchain on value-creation levels in the global technology market is expected to reach US$3.1 trillion by 20303.
To illustrate how blockchain is reshaping the business model, a leading retail coffee chain has introduced an initiative using blockchain technology which serves to monitor the entire process from the time a coffee bean leaves the farm to the point when it reaches a customer’s cup. Furthermore, blockchain is able to create a clear data stream that the company can use for its inventory management systems and pricing.
Here is another example of blockchain being used in business, this time involving a multinational shipping and logistics operator engaged in container vessels, supply ships and reefer container box businesses. Trade documentation administration and processing accounts for around 20% of its total shipping costs. After leveraging blockchain technology, the company digitises and automates the filing of paperwork, including bills of lading, making it possible to more efficiently and securely submit, validate and approve paperwork. The introduction of blockchain technology results in significant cost and time savings in clearance and cargo movement. The real-time tracking of shipment events powered by blockchain technology also strengthens the company’s risk management while reducing human error.
Thanks to the numerous benefits of blockchain technology, studies have shown that 22% of businesses have already implemented it in 20194.
BNY Mellon Investment Management has been providing investors with thematic investment solutions since 2011. Their unique investment processes have enabled them to effectively identify emerging trends with long-term disruptive power, one example being the burgeoning blockchain innovation market.
BNY Mellon Blockchain Innovation Fund is a thematic equity fund focused on companies likely to benefit from distributed ledger technology. The company takes a unique investment approach and seeks to gain exposure to the early adopters of blockchain technology who may ultimately set standards within their respective industries. Their bottom-up approach to stock-selection and in-depth investigative research enable the company to differentiate from other technology-focused thematic strategies.
Theme-driven research has been at the heart of BNY Mellon Investment Management’s actively managed equity funds for over 15 years, enabling the company to identify and capitalise on trends with the potential for growth.
Please visit the BNY Mellon Investment Management webpage to learn more about BNY Mellon Blockchain Innovation Fund.
1 Source: coinmarketcap.com, 24 March 2022.
2 Source: Cisco “Blockchain by Cisco”, published December 2018. BNY Mellon Investment Management has reviewed the mentioned research and believes that the above findings hold true even without including more recent data.
3 Source: International Energy Agency as at 5 November 2017, Global Market Insights as at 1 February 2018, Mellon analysis as at 15 February 2019. BNY Mellon Investment Management has reviewed the mentioned research and believes that the above findings hold true even without including more recent data.
4 Source: CNN, Grant Thornton 2019 CFO Survey. Based on survey responses from 378 senior finance executives in companies with revenues between US$100 million to US$20 billion, mostly headquartered in the US. BNY Mellon Investment Management has reviewed the mentioned research and believes that the above findings hold true even without including more recent data.
Objective/Performance Risk: There is no guarantee that the Fund will achieve its objectives.
Currency Risk: This Fund invests in international markets which means it is exposed to changes in currency rates which could affect the value of the Fund.
Derivatives Risk: Derivatives are highly sensitive to changes in the value of the asset from which their value is derived. A small movement in the value of the underlying asset can cause a large movement in the value of the derivative. This can increase the sizes of losses and gains, causing the value of your investment to fluctuate. When using derivatives, the Fund can lose significantly more than the amount it has invested in derivatives.
Emerging Markets Risk: Emerging Markets have additional risks due to less-developed market practices.
Market Capitalisation Risk: Investments in the securities of small to medium-sized companies (by market capitalisation) may be riskier and less liquid (i.e. harder to sell) than large companies. This means that their share prices may have greater fluctuations.
Volcker Rule Risk: The Bank of New York Mellon Corporation or one of its affiliates (“BNYM”) has invested in the Fund. As a result of restrictions under the “Volcker Rule,” which has been adopted by U.S. Regulators, BNYM must reduce its shareholding percentage so that it constitutes less than 15% of the Fund within, generally, three years of the Fund’s establishment (which starts when the Fund’s manager begins making investments for the Fund). Risks may include: BNYM may initially own a proportionately larger percentage of the Fund, and any mandatory reductions may increase Fund portfolio turnover rates, resulting in increased costs, expenses and taxes. Details of BNYM’s investment in the Fund are available upon request.
Counterparty Risk: The insolvency of any institutions providing services such as custody of assets or acting as a counterparty to derivatives or other contractual arrangements, may expose the Fund to financial loss.
Blockchain Innovation Companies Risk: The value of securities of Blockchain Innovation Companies may be negatively impacted by changes in regulation and are dependent upon consumer and business acceptance of the distributed ledger technology. Distributed ledger technology is a new and relatively untested technology which could be vulnerable to fraud. The Fund’s value may be more subject to risks of developing technologies, competitive pressures and intellectual property rights challenges.
Share Class Currency Risk: Share classes may be denominated in a different currency from the base currency of the Fund. Changes in the exchange rate between the share class currency and the base currency may affect the value of your investment.
Share Class Hedging Risk: The hedging strategy is used to reduce the impact of exchange rate movements between the share class currency and the base currency. It may not completely achieve this due to factors such as interest rate differentials.
IMPORTANT INFORMATION
BNY Mellon Blockchain Innovation Fund (the “Fund”) aims to achieve long-term capital growth by primarily investing in digital assets companies. Digital assets companies are companies likely to benefit from the emerging or ongoing revenue and/or cost-savings opportunities offered by blockchain technology (synonymously known as distributed ledger technology) or companies which enable blockchain technology (heerein after “Blockchain Innovation Companies”). Blockchain technology, can be most simply defined as an integrated software and hardware that enables companies to independently maintain and exchange digitalised transactional data in a standardised format.
This Fund is a sub-fund under BNY Mellon Global Funds, plc (the “Responsible Person”), which is an open-ended umbrella investment company with variable capital incorporated in Ireland with segregated liability between sub-funds and authorised by the Central Bank of Ireland. The Fund is recognised for retail distribution in Singapore under Section 287 of the Securities and Futures Act 2001. The Responsible Person has appointed BNY Mellon Investment Management Singapore Pte. Limited (“BNYM-IM-SG”) as its Singapore Representative. The prospectus in relation to the Fund is available and a copy of it may be obtained from http://www.bnymellonimapac.com/sg/funds or at BNYM-IM-SG’s distributors. A potential investor should read the prospectus before deciding whether to subscribe or purchase units in the Fund. The value of the units in the Fund and the income accruing to the units, if any, may fall or rise. The net asset value of the Fund is likely to have a high volatility due to its investment policies or portfolio management techniques. This document shall be used in Singapore only and shall not be used for the purpose of an offer or solicitation in any other jurisdiction or in any circumstances in which such offer or solicitation is unlawful or not authorised. All information herein is made for information purposes only and subject to change at any time without notice, and should not be construed as investment advice or recommendation. Investors should seek relevant professional/financial advice before investing in the Fund and should read this document in conjunction with the prospectus of the Fund. The Responsible Person, BNYM–IM-SG and its affiliates are not responsible for any advice given to investors. Investments involve risks. A complete description of risk factors is set out in the Prospectus. Past performance is not a guide to future performance. The value of investments and the income from them is not guaranteed. The Fund may invest in financial derivatives. When you sell your investment you may get back less than you originally invested. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.
Issued by BNYM-IM-SG (Co. Reg. No. 201230427E) on 24 March 2022.
AP3917-24-03-2022 (3M)
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MCI (P) 031/10/2021, MCI (P) 032/10/2021. Published by SPH Media Limited, Co. Regn. No. 202120748H. Copyright © 2021 SPH Media Limited. All rights reserved.
