Alternatives Playbook
Our outlook, asset class views, and allocation guidance for private markets and liquid alternatives investments. It leverages our institutional investment expertise, deep resources, and global investment platform.
Q4 2024 alternatives outlook
With the global monetary policy easing cycle underway, its impact on alternatives is in focus for the fourth quarter. The tightening cycle seems to have subdued inflation, and the Federal Reserve’s (Fed's) concerns have shifted towards the potential weakness in growth, recently seen in the meaningful increase in the unemployment rate. Their cut likely lowers the probability of a recession, but their projections still emphasize a higher-for-longer rate environment with base rates near 3% for the medium term.1 While there are currently no significant changes to our multi-alternative asset class positioning, we’ll continue to monitor macroeconomic conditions as their impact on markets is unclear. Private markets and liquid alternatives are still appropriate tools to help investors improve growth, enhance potential income, and diversify a portfolio,2 in our view.
Asset class views
We remain neutral on how we’re allocating risk within our alternatives portfolio due to elevated downside growth risks, high equity valuations, and benign capital markets activity. In general, we’re more defensive, favoring private debt and hedged strategies versus private equity. Within asset classes, we look for assets that don’t rely on leverage to generate returns, which we’ll reassess as base rates are lowered.
Private real assets outlook and positioning
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Private credit outlook and positioning
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Private equity outlook and positioning
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Hedge funds outlook and positioning
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Listed real assets and commodities
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Digital assets outlook and positioning
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Get an in-depth look at our alternatives Q4 outlook and positioning based on valuations, fundamentals, and secular trends.
Asset allocations to consider
Adding private market and liquid alternatives assets to an investment portfolio may be able to provide enhanced returns, volatility mitigation,9 diversification,2 and income potential.10 Advisors are looking to increase their allocation to alternatives according to research from Cerulli Associates, in partnership with the Investments & Wealth Institute (IWI).11 (See asset allocations below.)
Sample alternatives allocations
For those thinking about adding alternative investments to portfolios, consider our sample allocations. The actual allocations will vary based on a client's objectives, risk tolerance, comfort with illiquid investments, and how alternatives fit into their overall portfolio. We also provide suggestions on how to consider funding new alternatives allocations using traditional portfolio assets.
| Asset class | Sample allocation | Liquidity scale | Role in portfolio | Funding source | Related products |
|---|---|---|---|---|---|
| Private equity | 20 - 30% | Low | Growth | 100% equities | N/A |
| Private real assets | 20 - 30% | Low | Growth Income Diversification2 |
50% equities 50% fixed income |
Invesco Real Estate |
| Private credit | 20 - 30% | Low | Income Diversification2 |
30% equities 70% fixed income |
XCRTX |
| Hedge funds | 10 - 20% | Medium | Diversification2 | 100% fixed income | N/A |
| Listed real assets and commodities | 3 - 10% | High | Growth Income Diversification2 |
70% equities 30% fixed income |
PDBC MLPTX |
| Digital assets | 0 - 7% | High | Growth Diversification2 |
80% equities 20% fixed income |
BTCO QETH |
These sample allocations are recommended starting points for how to incorporate an asset class into an alternatives bucket. Of the 13.3% reported optimal allocation to alternatives, the above sample allocations provide percentages for allocating among the alternatives asset classes.
Get positioning for your equity and fixed income allocations in our monthly Portfolio Playbook.
Alternatives at Invesco
Diversify portfolios with alternative assets across public and private markets to achieve enhanced returns and mitigate risk.
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Footnotes
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1
Source: Federal Reserve median target projections as of Sept. 18, 2024.
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2
Diversification – Private Real Estate Debt Direct correlation to other asset classes: Private Real Estate Debt – 1.00, Direct Lending – 0.32; Senior Loans – 0.19; High Yield – 0.17; Private Real Estate Equity – 0.29; Corporate Bonds – 0.08; CMBS – (0.09); Investment Grade Bonds – (0.11); Treasuries – (0.27); U.S. Equity – 0.21. Diversification does not guarantee a profit or eliminate the risk of loss. There is no guarantee that any trends shown herein will continue. Correlation is the degree to which two investments have historically moved in relation to each other.
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3
Source: Pitchbook “2Q24 Global M&A Report” as of 6/30/24.
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4
Source: Invesco, Bloomberg as of Aug, 31, 2024. Correlations are measured from Jan. 2000 to Dec. 2023 between the HFRI Global index (Hedge funds) and traditional assets, namely global fixed income (Bloomberg Global Agg 0.28) and Global Equities (MSCI ACWI 0.7). The HFRX Global Hedge Fund Index is designed to be representative of the overall composition of the hedge fund universe. It is comprised of all eligible hedge fund strategies falling within four principal strategies: equity hedge, event driven, macro/CTA, and relative value arbitrage. The Bloomberg Global Aggregate Bond Index is a broad-based index that measures the performance of global investment grade fixed-rate debt markets. It includes a variety of bonds and securities from both developed and emerging markets. The MSCI All Country World (ACWI) Index, which is a market capitalization weighted global equity index that tracks the performance of developed and emerging markets.
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5
Sources: Invesco Real Estate, Bloomberg L.P., as of Dec. 31, 2023. US-listed real estate average 20.6% return, and US equities average 13.8% return in 12-month periods after last Federal Reserve rate hike. Listed real estate defined as the FTSE NARIET Equity REITS index. US equities defined as the S&P 500 index. Analysis period from 1/1/1999 -12/31/2023. The three rate hike periods identified are described by the Federal Reserve's actions between June 1999 and May 2000 where the federal funds target rate was raised to 6.5% from a starting level of 5.0%, between June 2004 and June 2006 where it was raised to 5.25% from a starting level of 1.00%, between Dec 2015 and Dec 2018, where it was raised to 2.5% from a starting level of 0.00-0.25%. The subsequent one-year returns begin the first of the month following each respective rate hike period described. Past performance does not guarantee future results. An investment cannot be made into an index. The FTSE NAREIT All Equity REITs Index is a free-float adjusted, market capitalization-weighted index of US equity REITs.
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6
Source: Bloomberg L.P., as of Aug. 30, 2024. The Alerian MLP Index (28.8% annualized returns) has outperformed the S&P 500 Index (9.4% annualized returns) for the three year period ended Aug. 30, 2024. Past performance does not guarantee future results. An investment cannot be made into an index.
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7
Source: Bloomberg L.P. Commodities represented by the S&P GSCI Excess Return Index (SPGSCIP). Initial rate cut in July 5, 1995. An investor cannot invest directly in an index. Past performance is not a guarantee of future results.
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8
Source: Bloomberg galaxy crypto index as of Sept. 26, 2024. Q1 performance was 57.3% while performance since-to-date has been -22%. The Bloomberg Galaxy Crypto Index is a capped market capitalization-weighted index designed to measure the performance of the largest digital assets. Past performance does not guarantee future results. An investment cannot be made into an index.
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9
Enhanced returns, volatility mitigation: Source: Invesco Real Estate. Trailing 5-years of data, last 5 years of quarterly returns annualized 2019Q1-2023Q4, latest data available. Total returns and standard deviation (annualized) by asset class: Direct Lending – 9.09% and 3.70; Private Real Estate Debt – 6.88% and 0.77; Senior Loans – 5.83% and 8.58; High Yield – 5.35% and 10.94; Private Real Estate Equity – 4.34% and 5.42; Corporate Bonds – 2.63% and 9.52; CMBS – 1.60% and 5.35; Investment Grade Bonds – 1.10% and 6.57; Treasuries – 0.53% and 6.89; U.S. Equity 15.68% and 19.72, respectively. Past performance is not indicative of future results. There is no guarantee that any trends shown herein will continue. Standard deviation measures a portfolio’s or index’s range of total returns in comparison to the mean.
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10
Income Potential: Source: Invesco Real Estate. Trailing 5-years of data, last 5 years of quarterly returns annualized 2019Q1-2023Q4, latest data available. 5-Year Average Distribution Yields: Direct Lending – 9.99%; Private Real Estate Debt – 8.43%; Senior Loans – 6.74%; High Yield – 6.50%, Private Real Estate Equity – 4.23%; Corporate Bonds – 3.54%; Commercial Mortgage Bonds (CMBS) – 3.24%; Investment Grade Bonds – 2.81%; Treasuries – 2.23%. Past performance is not indicative of future results. An investment cannot be made into an index. There is no guarantee that any trends shown herein will continue.
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11
Source: Cerulli Research: Advisors were asked. "Across your client portfolios, please estimate their typical alternatives asset allocation. How do you expect this to change in the next two years, and what would be the optimal asset allocation? (Optimal Asset Allocation: If there were no investment restrictions and clients had a strong knowledge of alternatives. Please estimate the optimal allocation for your core client segment.)" Other buckets provided were equities and fixed income. Survey conducted in Q2 2023.
Private real assets outlook and positioning
Commercial real estate: Easing inflation and economic conditions, sharp declines in US Treasury yields, and the fed funds rate cut are driving confidence in a real estate recovery, and the start of a new real estate value cycle is close at hand. Transaction activity is expected to reaccelerate either late this year or in early 2025. Capitalization rates have stabilized and are significantly tighter than in previous cycles, so we aren’t expecting compression to drive returns. Near-term economic growth is expected to ease, and current pricing largely reflects different sector expectations for income growth and liquidity. This accentuates the need for property income growth and reliance on secular demand drivers that can help mitigate the softening economic environment.
Infrastructure: Despite above-average valuations (which are lagging public markets), record levels of dry powder, and limited fundraising in private infrastructure, an easing of policy and regulatory clarity post-election may provide a runway for investors to start deploying capital. Secular tailwinds within infrastructure include:
- Estimated domestic and global need for infrastructure investment over the next decade supported by the Infrastructure Investment and Jobs Act and the Inflation Reduction Act.
- Strong fundamentals within the transportation sector, driven in part by the post-pandemic rebound in travel and commerce.
- Energy infrastructure in the wake of conflict in Ukraine.
- Continued momentum in both the digital and energy transition/renewables sectors.
Our view as of 9/30/2024.
Private credit outlook and positioning
Direct lending: Inflation is expected to abate and the Federal Reserve is shifting to a more accommodative policy for the remainder of the year. Merger and acquisition (M&A) volumes are expected to improve as pressures mount for private equity firms to return capital to investors. While we may see some compression in spreads and original issue discounts (OID), we still believe that all-in direct lending yields will potentially remain elevated on an unlevered basis. These historically high levels of yield represent attractive opportunities from a risk/return perspective both to private equity assets and public markets.
Real asset debt: Declining benchmark rates may lower real asset debt yields closer to historical levels in the coming quarters, which in our view would remain attractive relative to other credit assets. Rate cuts are expected to help normalize capital market conditions by increasing transparency and liquidity, ultimately leading to additional transaction activity. Rate cuts will also provide relief for borrowers and lenders, likely leading to stronger debt service coverage and healthier loan-to-value ratios, in our view.
Our view as of 9/30/2024.
Private equity outlook and positioning
In the first half of 2024, the mergers and acquisitions (M&A) transaction market has been 34% lower than the already depressed 2023 numbers,3 leaving the private equity markets somewhat frozen. Green shoots may be springing up in the middle market (companies with enterprise values from $25 million to $1 billion), where activity is up 10% over the prior year.3 It’s aided by the valuation disparity between more expensive large-caps and less expensive small-cap public equities. Dry powder continues to sit idle as public market valuations remain high, and “take-private” transactions are at record low levels. A renewed secondaries market has been an outlet for aging private equity inventory. Lower interest rates and tighter spreads will likely improve the leveraged buyout outlook as the thawing of the exit market will be a welcome shift for general and limited partners. Growth equity and expansion capital strategies are our preferred sub-asset classes within private equity.
Our view as of 9/30/2024.
Hedge fund outlook and positioning
With low correlations to traditional assets4 and the possibility for higher-for-longer interest rates, we believe hedge funds are particularly attractive. Since they operate off of a spread, elevated base rates provide a generous tailwind. While not our base case, a market selloff due to a recession or inflation resurgence may prove hedge funds to be a valuable alternative within a portfolio. Spreads within event-driven strategies remain high due to limited capital market activity from mergers and acquisitions as private equity remains sidelined.
Our view as of 9/30/2024.
Listed real assets and commodities outlook and positioning
Listed real assets: Listed real estate has historically delivered strong returns relative to equities, following the final US Federal Reserve interest rate hike when interest rate-sensitive sectors draw investor attention.5 Falling interest rates and modest growth conditions may offer real estate investment opportunities as a new investment cycle begins. Listed real estate companies with favorable capital costs relative to their private real estate peers, combined with strong operating platforms, are most likely to find attractive investment opportunities, in our view.
Despite several years of outperforming the S&P 500 Index,6 midstream equities are well positioned to provide investors with attractive yield and total return potential in the years ahead, in our view. Valuations have remained attractive, and fundamentals support expectations for cash flow growth for most sectors, particularly those with business segments focused on key producing basins and those that support activities to export crude oil, refined products, liquified petroleum gases (LPGs), and/or liquified natural gas (LNG).
Commodities: With the Fed officially kickstarting its easing cycle in September, commodities have, and will likely, continue to receive support. Following the initial rate cut in July 1995, commodities ticked up ~2% in three months, ~14% in six months, and ultimately ~32% in nine months.7 Sector-wise, energy was the strongest performer, followed by agriculture, especially in the nine-month period following the initial rate cut in 1995. Demand concerns, especially in China, remain an overarching headwind for both the energy and industrial metals sectors. Global manufacturing is bearish, with China, the US, and Europe all still signaling contractions. A recovery in global manufacturing enabled by less restrictive policy could lead to more constructive sentiment at the end of the year and going into 2025.
Our view as of 9/30/2024.
Digital assets
Following the strong Q1 performance on the back of the US launch of spot bitcoin exchange traded products (ETPs),8 digital assets remained largely rangebound. During Q3, recent spot (ETPs) have seen tepid demand and even some outflows, reflecting our view that much of the buying momentum was frontloaded in Q1. Broader market turbulence during Q3 has also helped keep digital asset prices high but range bound. Going forward, we believe the Federal Reserve rate cuts are likely to help provide room for upside surprises, in our view. But with bitcoin and other digital assets already expensive relative to history, we expect limited potential to move higher. Clarity from the regulatory environment will likely be welcome for crypto investors, with both presidential candidates publicly endorsing digital assets.
Our view as of 9/30/2024.
In general, liquid alternatives, such as commodities, hedge funds, listed real assets, and digitals assets, may make sense for investors who want exposure to alternatives, but still want to easily access this money. Private market assets, such as private credit, private equity, and private real assets, may make sense for investors willing to have less access in exchange for additional return potential, enhanced yield, and diversification. For some, a combination of liquid and private market assets can make sense.
Important information
NA3889817
The opinions expressed are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.
The Secured Overnight Financing Rate (SOFR) is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities.
Coverage ratios are a measure of a company's ability to service its debt and meet its financial obligations.
Direct Lending is represented by Cliffwater Direct Lending Index (CDLI) seeks to measure the unlevered, gross of fee performance of U.S. middle market corporate loans, as represented by the asset-weighted performance of the underlying assets of Business Development Companies (BDCs), including both exchange-traded and unlisted BDCs.
Private Real Estate Debt is represented by Giliberto-Levy High-Yield Real Estate Debt Index (G-L 2) which measures total return and its components for many forms of high-yield CRE debt, such as high-yield commercial mortgage debt performance for high-yield loans, such as mezzanine loans, preferred equity and "B" notes.
High Yield is represented by Bloomberg US Corporate High Yield Bond Index which measures the USD-denominated, high yield, fixed-rate corporate bond market
Senior Loans is represented by Morningstar LSTA US Leveraged Loan 100 Index which is designed to measure the performance of the 100 largest facilities in the US leveraged loan market.
Private Real Estate Equity is represented by NCREIF Property Index (the “NPI”) on the basis that the NPI is the broadest measure of private real estate index returns. The NPI is published by the National Council of Real Estate Investment Fiduciaries and is a quarterly, composite total return (based on appraisal values) for private commercial real estate properties held for investment purposes including fund expenses but excluding leverage and management and advisory fees. NCREIF data reflects the returns of a blended portfolio of institutional quality real estate and does not reflect the use of leverage or the impact of management and advisory fees.
Corporate Bonds is represented by Bloomberg U.S. Corporate Value Unhedged USD Index which measures the investment grade, fixed-rate, taxable corporate bond market. It includes USD denominated securities publicly issued by US and non-US industrial, utility and financial issuers.
Commercial Mortgage Backed Securities (CMBS) is represented by Bloomberg US CMBS Investment Grade Index which measures the market of US Agency and US Non-Agency conduit and fusion CMBS deals with a minimum current deal size of $300mn.
Investment Grade Bonds is represented by Bloomberg US Aggregate Bond Index, an unmanaged index considered representative of the US investment-grade, fixed-rate bond market.
Treasuries is represented by Bloomberg U.S. Treasury Total Return Unhedged Index which measures US dollar-denominated, fixed-rate, nominal debt issued by the US Treasury.
U.S. Equities is represented by S&P 500 Index, an unmanaged index of the 500 largest stocks, weighted by market capitalization and considered representative of the broader stock market.
An investment cannot be made into an index.
This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.
Liquidity scale: Low represents private assets that are non-tradable or are limited in their ability to be redeemed; medium represents a wide range where some funds may be non-traded, such as private hedge funds, while others may be significantly easier to redeem with lock-up periods that range from 2-10 months with a 14-70 day notice and a redemption period of 1-3 months; high represents assets or funds that are either traded or offer near instantaneous execution for sales and redemptions.
Funding source is for illustrative purposes only and is meant to be a general view of how an asset may be funded from portions of a traditional portfolio consisting of equities and fixed income. These percentages represent portions of the portfolio assets which have similar risk characteristics to that of the alternative asset.
Dry powder is the amount of capital that is committed to a private fund, but not yet deployed into deals or illiquid assets.
Base rates are represented by SOFR (The Secured Overnight Financing Rate) which is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities.
Free cash flow yield is a measure of free cash flow generated relative to the value of the underlying asset and is used as a measure of the fundamental performance the asset.
Alpha is a measure of performance relative to a benchmark and adjusted for market risk. It is often used to measure manager skill.
Beta is the risk of a broad market benchmark.
Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC)
There are risks involved with investing in ETFs, including possible loss of money. Actively managed ETFs do not necessarily seek to replicate the performance of a specified index. Actively managed ETFs are subject to risks similar to stocks, including those related to short selling and margin maintenance. Ordinary brokerage commissions apply. The Fund's return may not match the return of the Index. The Fund is subject to certain other risks. Please see the current prospectus for more information regarding the risk associated with an investment in the Fund.
The Fund is subject to management risk because it is an actively managed portfolio. The investment techniques and risk analysis used by the portfolio managers may not produce the desired results.
Risks of futures contracts include: an imperfect correlation between the value of the futures contract and the underlying commodity; possible lack of a liquid secondary market; inability to close a futures contract when desired; losses due to unanticipated market movements; obligation for the Fund to make daily cash payments to maintain its required margin; failure to close a position may result in the Fund receiving an illiquid commodity; and unfavorable execution prices.
In pursuing its investment strategy, particularly when "rolling" futures contracts, the Fund may engage in frequent trading of its portfolio securities, resulting in a high portfolio turnover rate.
Commodity-linked notes may involve substantial risks, including risk of loss of a significant portion of principal and risks resulting from lack of a secondary trading market, temporary price distortions, and counterparty risk.
Swaps are subject to leveraging, liquidity and counterparty risks, and therefore may be difficult to value. Adverse changes in the value or level of the swap can result in gains or losses that are substantially greater than invested, with the potential for unlimited loss.
Derivatives may be more volatile and less liquid than traditional investments and are subject to market, interest rate, credit, leverage, counterparty and management risks. An investment in a derivative could lose more than the cash amount invested.
To qualify as a regulated investment company (“RIC”), the Fund must meet a qualifying income test each taxable year. Failure to comply with the test would have significant negative tax consequences for shareholders. The Fund believes that income from futures should be treated as qualifying income for purposes of this test, thus qualifying the Fund as a RIC. If the IRS were to determine that the Fund’s income is derived from the futures did not constitute qualifying income, the Fund likely would be required to reduce its exposure to such investments in order to maintain its RIC status.
The Fund’s strategy of investing through it’s Subsidiary in derivatives and other financially-linked instruments whose performance is expected to correspond to the commodity markets may cause the Fund to recognize more ordinary income. Particularly in periods of rising commodity values, the Fund may recognize higher-than-normal ordinary income. Investors should consult with their tax advisor and review all potential tax considerations when determining whether to invest.
Leverage created from borrowing or certain types of transactions or instruments may impair liquidity, cause positions to be liquidated at an unfavorable time, lose more than the amount invested, or increase volatility.
The Fund may hold illiquid securities that it may be unable to sell at the preferred time or price and could lose its entire investment in such securities.
The Fund currently intends to effect creations and redemptions principally for cash, rather than principally in-kind because of the nature of the Fund's investments. As such, investments in the Fund may be less tax efficient than investments in ETFs that create and redeem in-kind.
Invesco Dynamic Credit Opportunity Fund (XCRTX)
The Fund is a closed-end management investment company that is operated as an interval fund, and should be considered a speculative, long-term investment of limited liquidity that entails substantial risks, and you should only invest in the Fund if you can sustain a complete loss of your investment. As a result, you may receive little or no return on your investment or may lose part or all of your investment.
The Fund is suitable only for investors who can bear the risks associated with the Fund's limited liquidity. The Fund does not currently intend to list its Shares for trading on any national securities exchange. The Shares are, therefore, not readily marketable and no market is expected to develop. Liquidity for the Shares will be provided only through quarterly repurchase offers between 5% and 25% of the Shares at NAV, and there's no guarantee that you will be able to sell all of the Shares you desire to sell in the repurchase offer. As a result, you should consider an investment in the Fund to be of limited liquidity.
There is no assurance that annual distributions paid by the Fund will be maintained at the targeted level or that dividends will be paid at all. Although the Fund does not intend to use offering proceeds to fund distributions, the Fund's distributions may be funded from unlimited amounts of offering proceeds or borrowings, which may constitute a return of capital and reduce the amount of capital available to the Fund for investment. Any capital returned to Shareholders through distributions will be distributed after payment of fees and expenses.
Derivatives may be more volatile and less liquid than traditional investments and are subject to market, interest rate, credit, leverage, counterparty and management risks. An investment in a derivative could lose more than the cash amount invested.
There are risks associated with borrowing or issuing preferred shares, including that the costs of the financial leverage exceed the income from investments made with such leverage, the higher volatility of the net asset value of the common shares, and that fluctuations in the interest rates on the borrowing or dividend rates on preferred shares may affect the yield and distributions to the common shareholders. Use of leverage also may impair the fund's ability to maintain its qualification for federal income taxes as a regulated investment company.
The risks of investing in securities of foreign issuers, including emerging markets, can include fluctuations in foreign currencies, political and economic instability, and foreign taxation issues.
Junk bonds involve a greater risk of default or price changes due to changes in the issuer’s credit quality. The values of junk bonds fluctuate more than those of high quality bonds and can decline significantly over short time periods.
Leverage created from borrowing or certain types of transactions or instruments may impair the fund’s liquidity, cause it to liquidate positions at an unfavorable time or lose more than it invested, increase volatility or otherwise not achieve its intended objective.
The fund is a closed-end investment company designed primarily for long-term investors and not as a trading vehicle. While there is no restriction on transferring the shares, the fund does not intend to list the shares for trading on any national securities exchange. There is no secondary trading market for shares. An investment in the shares is illiquid. There is no guarantee that you will be able to sell all of the shares that you desire to sell in any repurchase offer by the fund.
There is less readily available, reliable information about most senior loans than there is for many other types of securities. In addition, there is no minimum rating or other independent evaluation of a borrower or its securities limiting the fund's investments, and the adviser relies primarily on its own evaluation of borrower credit quality rather than on any available independent sources.
Senior Loans, like most other debt obligations, are subject to the risk of default. Default in the payment of interest or principal on a Senior Loan will result in a reduction in income to the Fund, a reduction in the value of the Senior Loan and a potential decrease in the Fund’s net asset value. The risk of default will increase in the event of an economic downturn or a substantial increase in interest rates.
The Fund is non-diversified and may experience greater volatility than a more diversified investment.
The fund is subject to certain other risks. Please see the current prospectus for more information regarding the risks associated with an investment in the fund.
Invesco Galaxy Bitcoin ETF
The Fund is speculative and involves a high degree of risk. An investor may lose all or substantially all of an investment in the Fund.
The Fund is not a mutual fund or any other type of Investment Company within the meaning of the Investment Company Act of 1940, as amended, and is not subject to regulation thereunder.
Shares in the Fund are not FDIC insured, may lose value and have no bank guarantee.
This material must be accompanied or preceded by a prospectus. Please read the prospectus carefully before investing.
The Fund currently intends to effect creations and redemptions principally for cash, rather than principally in-kind because of the nature of the Fund's investments. As such, investments in the Fund may be less tax efficient than investments in ETFs that create and redeem in-kind.
Bitcoin has historically exhibited high price volatility relative to more traditional asset classes, which may be due to speculation regarding potential future appreciation in value. The value of the Trust’s investments in bitcoin could decline rapidly, including to zero.
The further development and acceptance of the Bitcoin network, which is part of a new and rapidly changing industry, is subject to a variety of factors that are difficult to evaluate. The slowing, stopping or reversing of the development or acceptance of the network may adversely affect the price of bitcoin and therefore an investment in the Shares.
Currently, there is relatively limited use of bitcoin in the retail and commercial marketplace in comparison to relatively extensive use as a store of value, contributing to price volatility that could adversely affect an investment in the Shares.
Regulatory changes or actions may alter the nature of an investment in bitcoin or restrict the use of bitcoin or the operations of the Bitcoin network or venues on which bitcoin trades. For example, it may become difficult or illegal to acquire, hold, sell or use bitcoin in one or more countries, which could adversely impact the price of bitcoin.
The Trust’s returns will not match the performance of bitcoin because the Trust incurs the Sponsor Fee and may incur other expenses.
The Market Price of shares may reflect a discount or premium to NAV.
The price of bitcoin may be impacted by the behaviour of a small number of influential individuals or companies.
Bitcoin faces scaling obstacles that can lead to high fees or slow transaction settlement times, and attempts to increase the volume of transactions may not be effective.
Miners could act in collusion to raise transaction fees, which may affect the usage of the Bitcoin network.
Competition from central bank digital currencies (“CDBCs”) and other digital assets could adversely affect the value of bitcoin and other digital assets.
Prices of bitcoin may be affected due to stablecoins, the activities of stablecoin users and their regulatory treatment.
The open-source structure of the Bitcoin network protocol means that certain core developers and other contributors may not be directly compensated for their contributions in maintaining and developing the Bitcoin network protocol. A failure to properly monitor and upgrade the Bitcoin network protocol could damage the network.
Lack of clarity in the corporate governance of bitcoin may lead to ineffective decision-making that slow development or prevents the Bitcoin network from overcoming important obstacles.
If the award of new bitcoin for solving blocks and transaction fees for recording transactions are not sufficiently high to incentivize miners, miners may reduce or cease processing power to solve blocks which could lead to confirmations on the Bitcoin blockchain being temporarily slowed. Significant delays in transaction confirmations could result in a loss of confidence in the Bitcoin network, which could adversely affect an investment in the Shares.
A temporary or permanent “fork” in the blockchain network could adversely affect an investment in the Shares.
Flaws in the source code of Bitcoin, or flaws in the underlying cryptography, could leave the Bitcoin network vulnerable to a multitude of attack vectors.
A disruption of the internet may affect the use of bitcoin and subsequently the value of the Shares.
Risks of over or under regulation in the digital asset ecosystem could stifle innovation, which could adversely impact the value of the Shares.
Shareholders do not have the protections associated with ownership of Shares in an investment company registered under the Investment Company Act of 1940 (the “1940 Act”) or the protections afforded by the Commodity Exchange Act (the “CEA”).
Future regulations may require the Trust and the Sponsor to become registered, which may cause the Trust to liquidate.
The tax treatment of bitcoin and other digital assets is uncertain and may be adverse, which could adversely affect the value of an investment in the Shares.
Intellectual property rights claims may adversely affect the operation of the Bitcoin network.
The venues through which bitcoin trades are relatively new and may be more exposed to operations problems or failure than trading venues for other assets.
Ownership of bitcoin is pseudonymous, and the supply of accessible bitcoin is unknown. Entities with substantial holdings in bitcoin may engage in large-scale sales or distributions, either on nonmarket terms or in the ordinary course, which could result in a reduction in in the price of bitcoin.
The Trust is subject to the risks due to its concentration in a single asset.
Bitcoin spot trading venues are not subject to the same regulatory oversight as traditional equity exchanges.
Bitcoin transactions are irrevocable and stolen or incorrectly transferred bitcoin may be irretrievable. As a result, any incorrectly executed bitcoin transactions could adversely affect an investment in the Trust.
QETH - Invesco Galaxy Ethereum ETF
The Fund is speculative and involves a high degree of risk. An investor may lose all or substantially all of an investment in the Fund.
The Fund is not a mutual fund or any other type of Investment Company within the meaning of the Investment Company Act of 1940, as amended, and is not subject to regulation thereunder.
Shares in the Fund are not FDIC insured, may lose value and have no bank guarantee.
This material must be accompanied or preceded by a prospectus. Please read the prospectus carefully before investing.
The Fund currently intends to effect creations and redemptions principally for cash, rather than principally in-kind because of the nature of the Fund's investments. As such,
investments in the Fund may be less tax efficient than investments in ETFs that create and redeem in-kind.
The Trust will not participate in the proof-of-stake validation mechanism of the Ethereum network (i.e., the Trust will not “stake” its ether) to earn additional ether or seek other means of generating income from its ether holdings.
Ether has historically exhibited high price volatility relative to more traditional asset classes, which may be due to speculation regarding potential future appreciation in value. The value of the Trust’s investments in bitcoin could decline rapidly, including to zero.
The further development and acceptance of the Ethereum network, which is part of a new and rapidly changing industry, is subject to a variety of factors that are difficult to evaluate. The slowing, stopping or reversing of the development or acceptance of the network may adversely affect the price of ether and therefore an investment in the Shares.
Currently, there is relatively limited use of ether in the retail and commercial marketplace in comparison to relatively extensive use as a store of value, contributing to price volatility that could adversely affect an investment in the Shares.
Regulatory changes or actions may alter the nature of an investment in bitcoin or restrict the use of ether or the operations of the Ethereum network or venues on which bitcoin trades. For example, it may become difficult or illegal to acquire, hold, sell or use ether in one or more countries, which could adversely impact the price of ether.
In the past, flaws in the source code for ether have been discovered, including those that resulted in the theft of users’ ether. Several errors and defects have been publicly found and corrected, including those that disabled some functionality for users and exposed users’ personal information. Discovery of flaws in or exploitations of the source code that allow malicious actors to take or create money in contravention of known network rules has occurred.
The Trust’s returns will not match the performance of ether because the Trust incurs the Sponsor Fee and may incur other expenses.
The Market Price of shares may reflect a discount or premium to NAV.
The price of ether may be impacted by the behavior of a small number of influential individuals or companies.
The Ethereum network and ether face scaling obstacles that can lead to high fees or slow transaction settlement times and attempts to increase the volume of transactions may not be effective.
Competition from central bank digital currencies (“CDBCs”) and other digital assets could adversely affect the value of ether and other digital assets.
Prices of ether may be affected due to stablecoins, the activities of stablecoin users and their regulatory treatment.
A temporary or permanent “fork” in the Ethereum network could adversely affect an investment in the Shares.
A disruption of the internet may affect the use of Ethereum and subsequently the value of the Shares.
Future regulations may require the Trust and the Sponsor to become registered, which may cause the Trust to liquidate.
The tax treatment of ether and other digital assets is uncertain and may be adverse, which could adversely affect the value of an investment in the Shares.
The venues through which ether trades are relatively new and may be more exposed to operations problems or failure than trading venues for other assets.
The Trust is subject to the risks due to its concentration in a single asset.
Ether spot trading venues are not subject to the same regulatory oversight as traditional equity exchanges.
Ethereum transactions are irrevocable and stolen or incorrectly transferred bitcoin may be irretrievable. As a result, any incorrectly executed bitcoin transactions could adversely affect an investment in the Trust.
The S&P 500® Index is an unmanaged index considered representative of the US stock market.
The federal funds rate is the rate at which banks lend balances to each other overnight.
The capitalization rate (or cap rate) is the rate of return that's expected to be generated on a real estate investment property.
Alternative products typically hold more non-traditional investments and employ more complex trading strategies, including hedging and leveraging through derivatives, short selling and opportunistic strategies that change with market conditions. Investors considering alternatives should be aware of their unique characteristics and additional risks from the strategies they use. Like all investments, performance will fluctuate. You can lose money.
Bitcoins are considered a highly speculative investment due to their lack of guaranteed value and limited track record. Because of their digital nature, they pose risks from hackers, malware, fraud, and operational glitches. Bitcoins are not legal tender and are operated by a decentralized authority, unlike government-issued currencies. Bitcoin exchanges and Bitcoin accounts are not backed or insured by any type of federal or government program or bank.
Commodities may subject an investor to greater volatility than traditional securities such as stocks and bonds and can fluctuate significantly based on weather, political, tax, and other regulatory and market developments.
In general, stock values fluctuate, sometimes widely, in response to activities specific to the company as well as general market, economic and political conditions.
Most MLPs operate in the energy sector and are subject to the risks generally applicable to companies in that sector, including commodity pricing risk, supply and demand risk, depletion risk and exploration risk. MLPs are also subject to the risk that regulatory or legislative changes could eliminate the tax benefits enjoyed by MLPs, which could have a negative impact on the after-tax income available for distribution by the MLPs and/or the value of the portfolio’s investments.
Investments in real estate-related instruments may be affected by economic, legal, or environmental factors that affect property values, rents or occupancies of real estate. Real estate companies, including REITs or similar structures, tend to be small and mid-cap companies and their shares may be more volatile and less liquid.
Spread represents the difference between two values or asset returns.
An original issue discount (OID) is the discount in price from a bond's face value at the time a bond or other debt instrument is first issued.
Tightening monetary policy includes actions by a central bank to curb inflation.
The Alerian MLP Index is a composite of prominent energy master limited partnerships calculated using a float-adjusted market capitalization methodology.
The S&P GSCI Index is an unmanaged world production-weighted index comprised of the principal physical commodities that are the subject of active, liquid futures markets.
Bitcoin is a digital currency (also called cryptocurrency) that isn’t backed by any country's central bank or government. Bitcoins can be traded for goods or services with vendors who accept bitcoins as payment.
Monetary easing refers to the lowering of interest rates and deposit ratios by central banks.
