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Fidelity Says Pension Plans Are Starting to Explore Cryptocurrencies with $4.7 Trillion Opportunity – DL News
- Pension plans are starting to think about investing in cryptocurrencies.
- The rise of spot Bitcoin ETFs could accelerate this process.
Pension plans are warming up to the idea of investing in cryptocurrencies, but very slowly.
Defined benefit plans and other pension funds “are just starting to talk to their investment committees” about crypto-assets, Manuel Nordeste, vice president of Fidelity Digital Assets, said at an event in London on Wednesday.
Small-scale but sophisticated investors such as family offices and high-net-worth individuals are more likely to buy cryptocurrencies, he said.
Nordeste said that when his business started – Fidelity Digital Assets was founded in 2018 – he saw “family offices, small specialist asset managers and hedge funds, and then the big blue-chip hedge funds”.
“Now, we’re starting to have conversations with the larger, real money institutional investor types, and we’re getting some of those clients, as well as corporates and so on,” he said.
According to a survey Fidelity Digital Assets, analyzing the broader market, highlighted that 80% of high net worth individuals rated digital assets positively, compared to 23% of pension plans. And 48% of these individuals had invested in digital assets, while only 7% of pension plans had done so.
Smaller companies can be more nimble and take on more risk, because “they don’t have any investment mandates or investment mandates that are easy to manage,” Nordeste said.
This is “versus a retirement where it will take a long time and you will need to be in a certain place to be in the market.”
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Faithful rival BlackRock said Thursday that it expects to see institutions, including pension funds, begin trading in the Bitcoin spot market through exchange-traded fund products approved by the U.S. Securities and Exchange Commission in January.
Spot Bitcoin ETFs, offered by both BlackRock and Fidelity, offer more affordable access to Bitcoin than regular cryptocurrency exchanges.
And because they are family investment products, they could ease retirees’ worries.
Arizona lawmakers introduced a proposal in February a resolution which encourages state pension plans to “monitor Bitcoin ETFs and other digital asset ETFs and to consider including a digital asset ETF in their investment portfolios.”
American public pensions represent an attractive source of inflows for any asset.
According to data from the think tank Urban Institute, the retirement savings of American teachers and firefighters are equal to the total $4.7 trillion in 2023.
The majority – 71% – is allocated to equities and 21% to debt.
Pension funds could generate”a constant absorption of physical coins” said Darius Tabai, former global head of metals trading at Merril Lynch and Credit Suisse DL News.
Although a 2022 survey showed that 94% of public pension plans had some exposure to cryptocurrencies, American retirees were mostly unscathed by the 2023 bear rush.
Prudent pensions
Pension funds have conservative strategies: after all, they are protecting the life savings of future retirees.
Companies worry about the risks associated with a set of new and highly volatile assets that occupy an uncertain place in the eyes of regulators.
Risk also abounds in traditional assets, but there it is mitigated by a trusted network of intermediaries, such as custodian banks and prime brokers.
While this type of infrastructure is emerging for cryptocurrencies, it is still nascent, asset managers say.
This is where products like the Bitcoin ETF could provide a simpler option for investors.
Contact the writer at joanna@dlnews.com.