Bitcoin Mania Helps Fund’s Returns, But Crypto Push Leads to Downgrade

A mutual fund that invests in banks and financial firms was downgraded by Morningstar Inc., with the rating firm saying the fund was taking too much cryptocurrency risk. In 2020, Emerald Advisers LLC’s Banking and Finance fund bought cryptocurrency funds, as well as invested in cryptocurrency exchange Voyager Digital Ltd. and Galaxy Digital Holdings Ltd. , a bitcoin-focused firm that offers banking services. Amid a surge in bitcoin and other digital currencies over the past year, those bets have ballooned in size, while the fund’s exposure to regional bank stocks—what it is best known for—fell to one-third of assets in February, the lowest in its 23-year history. Morningstar’s decision to downgrade the fund could have ripple effects for Emerald Advisers. Through its ratings system, Morningstar is the gate keeper for many investors around the world as they evaluate which funds in which to invest. The firm’s portfolio managers say the…

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