UK Pension Funds Adopt $BTC, US Boards Favor ETFs
- UK-based pension advisor Cartwright introduced a new scheme with a 3% Bitcoin ($BTC) allocation.
- Cartwright believes $BTC offers the potential for significant returns while carrying relatively low risk.
- US pension funds opt for a more conservative approach by investing in crypto exchange-traded funds (ETFs).
Who would've thought pension funds would invest in crypto - and yet, here we are. UK-based pension advisor Cartwright rolled out its first scheme with a 3% $BTC allocation for forward-looking trustees.
But why would anyone trust their future to an asset as volatile as Bitcoin? Let's unpack potential upsides.
Cartwright Bets Big on $BTC$BTC is now just 6% from hitting a new all-time high, but let's not forget how it plunged over 70% in 2022. Crypto has made its fair share of millionaires, but it also wiped out some fortunes. So, what's the reasoning behind Cartwright's new pension scheme?
Cartwright sees $BTC as a unique asset with an asymmetric risk-return profile. This means you can potentially gain a lot more than you could lose.
Besides, crypto is the best way to diversify your portfolio. If government-issued currencies were to fail, crypto could become the primary medium of exchange.
The solution created also has a low minimum investment threshold meaning that this option is available to pension schemes of all sizes, unlike many historic investment ideas when they first become available.
Steve Robinson at Cartwright highlights the new pension scheme is suitable for risk-averse investors. You don't just bet on $BTC to hit $180K when you'll turn 70 - Cartwright's custody mechanism is designed to manage volatility and lock in profits.
US Pension Funds Favor ETFsCartwright isn't the only pension scheme advisor seeing potential in crypto. The Michigan Office of Retirement Services (ORS) with over $13.6B in assets under custody bought $10M worth of Grayscale Ethereum Trust (ETHE) shares, following July's purchase of $6.6M worth of $BTC ETFs.
Interestingly, ORS now owns more $ETH than $BTC despite the latter having gained broader institutional acceptance.
Similarly, the State of Wisconsin Investment Board bought over $99M worth of Blackrock's $BTC ETFs and $64M worth of Grayscale's $ETH ETFs in Q1 2024.
Professor of Finance David Krause says it's a small part of Wisconsin's $155B pension fund, but the interest is there nonetheless.
Florida's Chief Financial Officer Jimmy Patronis had also proposed adding crypto to the state's pension holdings. Patronis noted that $BTC offers potential benefits the state cannot afford to overlook.
Meanwhile, the South Korean pension service doesn't dive headfirst into crypto but reports holding $34M in MicroStrategy stock, which outperformed Microsoft since the company began heavily investing in $BTC.
Direct Ownership vs ETFsWhile US pension funds are gaining exposure to crypto through ETFs, Cartwright suggests holding $BTC directly. Caution is understandable, but the potential rewards of direct ownership could outweigh the risks for long-term investors.
Which approach will yield better results? We'll have to wait and see.
References- Cartwright advises first UK pension scheme on bitcoin asset allocation (Cartwright)
- Wisconsin Investment Board adds shares of BlackRock's spot bitcoin ETF, dumps GBTC (Pensions & Investments)
- Florida CFO Patronis Says State Should Consider Cryptocurrency for State Retirement Investments (Florida Daily)
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