iShares Equity Plus Bitcoin ETF (IBQT): A Look at Canada’s New All-in-One ETF

It's been a while since I've looked closely at some of the newer launches in the Canadian ETF market. Part of that is because I was getting tired of seeing another round of single-stock ETFs, often packaged with leverage, covered calls or both.

That's why the iShares Equity Plus Bitcoin ETF (IBQT) caught my attention. Rather than adding another tactical product, iShares has taken the increasingly popular all-in-one portfolio concept and made one relatively simple modification: adding a small allocation to Bitcoin.

The idea isn't entirely new. The Fidelity All-in-One Equity ETF (FEQT), despite its name, has incorporated a small cryptocurrency allocation through the Fidelity Advantage Bitcoin ETF (FBTC). That gave Fidelity a point of differentiation against the iShares Core Equity ETF Portfolio (XEQT).

Of course, XEQT investors could already replicate the idea themselves by adding a small position in the iShares Bitcoin ETF (IBIT). IBQT simply packages everything together, targeting approximately 97% equities and 3% Bitcoin while handling the portfolio construction and rebalancing internally.

I think that 3% allocation makes IBQT particularly interesting. Bitcoin is volatile enough that a relatively small position can still meaningfully affect portfolio returns. Packaging it inside an all-in-one ETF also removes the temptation to continually adjust that allocation as Bitcoin rises and falls.

So, is IBQT actually an improvement over simply owning XEQT, or is it solving a problem investors could easily address themselves? Here's how the new ETF works and where I think it could make sense.

What is IBQT?

IBQT targets approximately 97% equities and 3% Bitcoin. The ETF charges an all-inclusive 0.22% management fee, which should translate into a management expense ratio (MER) of roughly 0.25% after accounting for applicable taxes, but this won’t be known until a year later.

The equity allocation includes separate iShares ETFs covering the total U.S. stock market, the S&P/TSX Capped Composite Index, the MSCI EAFE Investable Market Index and emerging markets. Those allocations broadly resemble XEQT's geographic mix, with each trimmed slightly to make room for the approximately 3% allocation to Bitcoin through IBIT.

IBQT also uses a custom blended benchmark, the IBQT Composite Benchmark, rather than tracking a single conventional index. That's common for multi-asset allocation ETFs because no single benchmark accurately represents a portfolio combining several geographic equity markets with Bitcoin. The composite instead blends benchmarks corresponding to IBQT's underlying allocations in their target proportions, providing a more appropriate yardstick for evaluating the ETF's performance.

The result is effectively an all-equity global portfolio with a small amount of cryptocurrency bolted onto it, while retaining the convenience of a single ETF.

Is IBQT Worth It?

If you're going to include cryptocurrency in a diversified portfolio, I think something around a 3% allocation is one of the more sensible ways to approach it.

Bitcoin is already exceptionally volatile. You don't need a 20% or 30% allocation for it to meaningfully influence portfolio returns. Even a 3% to 5% position can move the needle if Bitcoin performs exceptionally well, while limiting the damage if it experiences another severe drawdown.

IBQT also solves an important behavioral problem: rebalancing. Buy XEQT and IBIT separately and you have to decide when to rebalance between them.

If Bitcoin suddenly doubles, are you really going to trim it back to 3%, or will you convince yourself to let the winner run? Conversely, after a major crypto selloff, will you actually buy enough IBIT to restore the target allocation? IBQT makes those decisions for you.

That said, I wouldn't sell XEQT simply to switch into IBQT, particularly in a taxable account where doing so could realize capital gains. If you're already happy with XEQT and want a small Bitcoin allocation, adding IBIT separately is straightforward and gives you greater control over how much crypto you own.

For someone starting from scratch who specifically wants a globally diversified equity portfolio with a small, automatically maintained Bitcoin allocation, however, I think IBQT is a well-designed option.

I also wouldn't be surprised if this concept eventually spreads to other iShares asset allocation ETFs. Fidelity already incorporates small cryptocurrency allocations across several of its all-in-one portfolios. There's no reason iShares couldn't eventually experiment with something similar for balanced portfolios, shaving a few percentage points from the conventional stock-and-bond mix to accommodate Bitcoin.

For now, IBQT fills a fairly specific niche. It isn't revolutionary, and existing XEQT investors can replicate it easily enough themselves. But for investors who want a small cryptocurrency allocation without another position to monitor and rebalance, the simplicity is precisely the point.