Pension funds, traditionally cautious in their investment strategies, are increasingly exploring opportunities in bitcoin, signaling a shift in the world of institutional finance. State pension schemes from Wisconsin and Michigan have emerged as significant holders of US stock market funds dedicated to cryptocurrencies, while UK and Australian pension funds have also started dipping their toes into bitcoin through funds or derivatives.
This growing interest is largely driven by the surge in bitcoin’s value over the past year, which more than doubled, touching a high of $100,000. With the arrival of a pro-crypto administration under President-elect Donald Trump, some analysts are predicting the cryptocurrency’s value could double again in 2025. Trump’s pledge to make the US “the bitcoin superpower of the world” and ease regulatory pressures has further fueled optimism in the sector.
According to Matt Scott, a consultant at Mercer, a pensions advisory firm in the UK, the post-election period has seen a surge in inquiries from pension trustees, with many reluctant to overlook a potential high-return asset class like bitcoin. Most pension funds have opted for regulated US exchange-traded funds (ETFs) that invest in crypto on behalf of investors, tracking tokens like bitcoin and ethereum.
The State of Wisconsin Investment Board, for example, was the 12th-largest shareholder in BlackRock’s bitcoin ETF as of September 2024, with its holding now worth approximately $155 million after a 50% increase in the fund’s value since the start of the quarter. Michigan’s pension system has also made crypto investments, becoming the sixth-largest shareholder in Grayscale’s Ethereum ETF, worth $12.9 million.
Despite the increasing institutional interest, some pension funds remain cautious. Canada’s Ontario Teachers’ Pension Plan, for instance, suffered a $95 million loss after the collapse of the FTX exchange in 2022. Similarly, Caisse de dépôt et placement du Québec, Canada’s second-largest pension manager, acknowledged it had entered the crypto market “too soon” after writing off a $150 million investment in the failed crypto lending platform Celsius Network.
Alex Pollak, head of UK and Israel at 21Shares, a cryptocurrency exchange-traded product provider, believes that the initial hesitancy towards crypto is dissipating. “There’s no doubt that the headwinds are disappearing,” he said, adding that institutional adoption of crypto would only increase in the future.
In the UK, pensions consultancy Cartwright facilitated its first bitcoin deal, advising a £50 million pension scheme to allocate around £1.5 million directly to bitcoin, bypassing ETFs. This move was seen as a potential strategy to address funding deficits and achieve outsized returns.
Sam Roberts, director of investment consulting at Cartwright, expressed optimism that 2025 could be a pivotal year for pension schemes exploring further crypto exposure. He also mentioned that over 50 individual savers had approached the consultancy, expressing dissatisfaction with their pension providers and asking for their funds to be moved entirely into crypto. Additionally, Cartwright is in discussions with two multiemployer pension funds about launching a bitcoin fund to cater to members seeking crypto exposure.
In Australia, AMP, a prominent pension fund manager, also made its first allocation to bitcoin futures. Senior portfolio manager Steve Flegg stated that while cryptocurrencies remain risky and unproven, their potential was too significant to ignore. “We thought it had become too big, and its potential was too great to continue to overlook,” he said.
Despite this, cryptocurrency exposure within pension funds remains a minority practice. Consultants are generally hesitant to recommend it due to the high volatility and lack of a clear valuation framework. The US Government Accountability Office (GAO) also raised concerns about the risks of crypto assets, warning in December about the “uniquely high volatility” of cryptocurrencies.
Daniel Peters, a partner in Aon’s global investment practice, voiced caution, stating that while some may see potential in crypto, he believes it should only be part of a pension fund strategy when allocated through specialized managers. “We don’t think pension funds should allocate to crypto — it’s highly volatile and lacks a robust valuation framework,” he said.
As the debate continues, it remains clear that while some pension funds are beginning to explore the potential of bitcoin, others are opting to wait for more clarity and stability in the cryptocurrency market.
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