(Kitco News) – The launch of the first spot Bitcoin (BTC) exchange-traded funds (ETFs) in the U.S. was expected to usher in a new era of institutional adoption for digital assets as pension funds, family offices, and other large investment pools finally had a simple, secure way to invest in the asset class.
But as anyone who has spent any length of time studying how large firms invest can attest, they do not make impulsive moves driven by FOMO, like many retail traders, and most are still observing how Bitcoin and the ETFs perform before jumping into the market.
As noted by Matt Hougan, Chief Investment Officer at Bitwise, who recently gave an hour-long keynote to a room full of the largest independent RIAs in the country at Barron's Advisor Independent Summit, “We’re still early.”
“Based on a show of hands, ~40% of the room owned Bitcoin personally, and ~5% or ~10% had exposure in client accounts. We're still early,” Hougan tweeted. “Most of this group is still months (maybe 3-12?) from investing in crypto on behalf of clients, but they [are] opening up to it rapidly. Put differently, we're making progress, but big chunks of the wealth market remain to be unlocked.”
On Tuesday, the crypto ecosystem got the first notable validation that the ETFs are indeed stoking the interest of major institutional players as Japan’s Government Pension Investment Fund (GPIF), the largest pension fund in the world, revealed that it is looking at Bitcoin as a potential diversification tool.
The GPIF was established in 2006 by the Japanese government and mainly focuses on investing in core infrastructure funds, which invest in assets essential for social and economic activities. According to the firm’s annual report for 2022, they primarily hold investments in traditional assets like domestic and foreign stocks and bonds, as well as alternative assets such as infrastructure and real estate.
According to a document posted on the GPIF’s website, the fund is in the process of developing new long-term investment policies in response to “major changes in the economy and society, and rapid technological progress,” and an investment in Bitcoin is being considered as part of that response.
The GPIF is launching a five-year research plan to explore innovative methods to diversify investments, with an emphasis on sustainability and risk management. As part of the plan, the GPIF has requested data on various potential investment diversification tools, including information about the assets the company considers “illiquid” and doesn’t hold.
The list of assets that fall into this category includes cryptocurrencies like Bitcoin, precious metals like gold, and other assets, the GPIF said. While the research plan does not guarantee that the firm will expand into any of the new assets that are studied, the company said it will consider whether to conduct future research based on the collected data.
“Our primary investment strategy is diversification by asset class, region, and timeframe,” the GPIF said in its annual report for 2022. “While market prices may fluctuate in the short term, GPIF will take full advantage of our long-term investment horizon to achieve investment returns in a more stable and efficient manner [...]”
As of the end of December 2023, the value of assets held by GPIF amounted to 225 trillion Japanese yen ($1.54 trillion), making it the world’s largest pension fund.
