Life insurance and annuity companies are increasingly placing some of their assets in bitcoin (BTC). While the best cryptocurrencies have delivered the best returns over the past decade, it looks like the long-debated institutional herd is finally entering the BTC market.
During the 2018 bear market, the multi-stakeholder work on Bitcoin development seemed to be focused on improving BTC’s regulatory position. These efforts have led to the emergence of incubation platforms at the institutional level, among other prerequisites for broader participation of regulated entities.
Over the past year, listed companies have begun adding bitcoin to their balance sheets, citing fiat currency devaluation concerns. Large cash flows from major central banks in support of stimulus packages adopted by governments to contain the economic shock of the coronavirus pandemic have left market observers wary of rising inflation.
With pension and insurance funds joining other publicly traded companies to invest in bitcoin, attention is now being drawn to whether the authorities themselves will start investing in bitcoin through their own government assets. Meanwhile, 2021 remains optimistic for the largest assets by market value, with the end of March being the best Q1 result in eight years.
Pension funds that have bitcoin
As Cointelegraph previously reported, KiwiSaver, a $ 350 million retirement plan operated by New Zealand Funds Management, recently divested 5% of its bitcoin assets. At the time, James Gregor, Chief Investment Officer of NZ Funds, noted that the similarities between bitcoin and gold make BTC an attractive resource for life and annuity insurance companies.
According to Grigor, NZ Funds has revised its proposal for 2020, including cryptocurrency investments in the catalog. The move allowed the company to buy BTC again in October, when Bitcoin was trading at around $ 10,000.
In less than six months, KiwiSaver, a fund maker of New Zealand, is now likely to earn nearly six times as much as an investment in bitcoin. For the CEO of NZ Funds, Bitcoin offers another set of opportunities beyond the usual traditional path to assets.
In fact, despite the price freeze, the bitter history of Bitcoin’s powerful compounding functions seems to be grabbing the attention of big money players. Hedge funds, family offices and listed companies have recently spun off assets in bitcoin.
In 2018 and 2019, Mark Josco and Anthony Pomplano of Morgan Creek Pension and Insurance Fund identified a class of institutional investors who should consider investing in Bitcoin. At the time, Pompigliano predicted that pension funds would face significant challenges in meeting their future obligations if they did not aggressively seek to diversify their portfolios beyond conventional investments in bonds and stocks.
In February 2019, Morgan Creek announced a blockchain-focused investment fund that is tied to two US government pension funds. Since then, among other investors, several pension funds and insurance companies have introduced some form of bitcoin exposure.
As Cointelegraph reported then, insurance company MassMutual, Massachusetts, added bitcoins to its government investment account. MassMutual allegedly bought $ 100 million worth of BTC from the New York Digital Investment Group, and also offered a $ 5 million stake in the company.
Destroying the company’s thesis on investing in bitcoin, MassMutual’s Chelsea Haraty told Cointelegraph that the move is indicative of the company’s broader strategy to capitalize on new opportunities while diversifying its asset portfolio, adding:
“In addition, our investments in NYDIG and Bitcoin are in line with MassMutual’s shared commitment to innovation, giving us a calculated but meaningful impact on the growing economic dimension of our growing digital world. Most importantly, our $ 100M investment in Bitcoin through NYDIG represents 0.05% – or less than a tenth of 1% – of the total GIA. ”
Haraty’s characterization of MassMutual’s bitcoin spending as “measured and meaningful” reflects the sentiment of market proponents such as Yusko and Pompliano, who are encouraging insurance companies and pension funds to invest in bitcoin. In fact, 1% is often used as a sufficient exposure ratio of BTC to institutional investors.
Secure dollar debt
Last January, Michael Sonnenshin, CEO of the Grayscale Crypto Fund, pointed out that pension funds are driving the growth of the cryptoasset management company. Inheritance and pensions were among active investors in the company’s bitcoin fund, Sonnenstein said.