Termination of Tracker Certificate on Bitcoin — new Bitcoin certificate available!

Vontobel is adjusting its range of products in the Bitcoin area to the current regulatory conditions. The high capital requirements in force since the end of 2019 are causing Vontobel to terminate the existing Bitcoin Tracker Certificates effective March 12, 2021. Consequently, Vontobel has decided to issue two new Tracker Certificates for this cryptocurrency, which is popular on the market. Here you can read about the exact reasons for terminating the Tracker Certificates, about what exactly will happen to products that investors currently are holding, and about your options as an investor.

Reasons for terminating the existing product

1. High capital requirements

The Tracker Certificate on Bitcoin that Vontobel issued in 2017 was the first one of its kind, and as of today it is one of the most traded products on the SIX. The products address a clear client need and were very much in demand. The capital requirements for Swiss issuers in the crypto area that have been applicable since the end of 2019 have led to the fact that Vontobel can no longer manage the Bitcoin Certificate in an economically viable way. The current management fee and the returns no longer sufficiently cover the cost of the product.

2. Accrued product costs influence participation

For products with ongoing costs, such as costs in the form of a management fee that is calculated into the costs daily, product performance deviates from the performance of the underlying in the case of long-term investments, which often causes questions. For the Tracker Certificate on Bitcoin, investors participate fully in the performance of the underlying adjusted by the subscription ratio but before the management fee is deducted. If the underlying—in this case Bitcoin—increases by 10 percent in the first year and if the certificate has a management fee of 1.5 percent p.a., then the Tracker Certificate shows a performance of 8.5 percent in the same time period. The difference between the performance of the underlying and the performance of the certificate is also called tracking error. Since the Bitcoin Tracker Certificate has already been on the market for more than three years, the product’s transparent costs have now accrued to over 4.5 percent and reduce participation in the performance of the underlying asset Bitcoin accordingly.

3. The ratio

Bitcoin is a phenomenon that has given many investors an unchanged fascination for several years. Sometimes the large price jumps in both directions are one of the reasons why Bitcoin is seen more and more in the business news. When Vontobel issued the Tracker Certificate on Bitcoin in 2017, the Bitcoin price was at around 5,500 US dollars. Since the subscription ratio of a product normally cannot be changed, the current Bitcoin product has become expensive for interested private investors who only want to invest small sums. This can be corrected by new certificates with a subscription ratio that accounts for the jumps that have occurred for Bitcoin.

The reasons listed above were pivotal in Vontobel’s decision to terminate the current Tracker Certificate on Bitcoin and replace it with two new Tracker Certificates with adjusted conditions.

What can I do now as an investor?

If you have invested in the terminated certificate, you now have two options:

- You can sell the Tracker Certificate on Bitcoin presumably by March 9, 2021 at the current buying price via your broker/bank or stock exchange and invest in one of the two Tracker Certificates that Vontobel is issuing (see next section) to enable you to continue investing in Bitcoin.

- Alternatively, you can wait and hold the terminated certificate until the termination date. The official termination amount per certificate will be determined according to the terms of issue and will be paid out to you by March 19, 2021. This process will take place automatically if you do not sell your position in advance. This guarantees your investment in the Bitcoin product until March 12, 2021. Investors can then earn potential returns and invest the sum or part of it again on the secondary market in one of the two new trackers.

Alternative investment solution for Bitcoin? New Tracker Certificates available!

Since the current Bitcoin Certificate will be terminated, Vontobel has decided to issue new Tracker Certificates on Bitcoin, which will address the previously described reasons for terminating the old product. The option of investing in the new Bitcoin Tracker Certificates should enable investors to continue their current Bitcoin investment from the terminated certificate in a way that is as seamless as possible. Investors can continue to make transparent investments in a certificate and receive market access to this cryptocurrency that is now the most important one worldwide.

Two new Bitcoin Certificates have been issued: a subscription product and a product that can be directly traded on the secondary market via the stock exchange. Investors that have invested in the current Bitcoin Certificate and investors that would like to invest in this kind of a certificate for the first time have the opportunity to acquire the new certificates.

1. Subscription product

The new Tracker Certificate on Bitcoin will be issued for subscription starting February 3, 2021. The subscription period will run until March 12, 2021, 12.00 p.m. (the subscription period can be closed earlier if the market conditions change or if the maximum size is reached). As of March 18, 2021, the product will be available on the secondary market and can be traded on the Swiss stock exchange as a listed security. Investors who have already invested in Tracker Certificates may find it interesting that the subscription price of the new Bitcoin Tracker Certificate will correspond to the termination price of the current Tracker Certificate adjusted by the different ratios.

2. Certificate that can be directly traded on the secondary market

The second Tracker Certificate will be directly issued on the secondary market and can be acquired and traded directly on the Swiss stock exchange SIX starting February 3, 2021.

With the new certificates, investors can fully participate in Bitcoin performance taking into account the management fee and can enjoy the issuer’s Aa3 Moody’s Rating. Vontobel also continues to function as the custodian for the Bitcoins that are the underlying assets of the new certificates. For the new certificates, Vontobel will continue to waive a clause in the term sheet that would put the risk of a cyberattack or the theft of the Bitcoins on the investors.

A management fee of 3.75 percent p.a. applies to the new certificates. The cost structure of the new products reflects the current capital requirements. The new subscription ratio of 1:100 also enables investors to purchase the products who want to participate in Bitcoin performance with a low capital expense and/or are planning to enter the market for the first time.

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