On May 15, Markets Insider reported that the state of Wisconsin made a significant foray into the cryptocurrency market by purchasing $163 million worth of Bitcoin during the first quarter of the year. This investment, documented in a 13F filing with the Securities and Exchange Commission (SEC), marks a notable moment for institutional investment in digital assets.
The Wisconsin Investment Board, which oversees the state’s $150 billion pension fund, has allocated approximately $38 billion in public stocks as of 31 March. The recent filing revealed that the board acquired over 1 million shares of the Grayscale Bitcoin Trust valued at $63.7 million and around 2.5 million shares of the iShares Bitcoin Trust worth $99.2 million. This strategic move positions Wisconsin as one of the pioneering state pension funds to embrace the crypto space.
Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence, highlighted the significance of this development, noting that state pension funds typically wait longer before engaging in new ETF markets. He emphasized that the early adoption by Wisconsin’s pension fund could signal a trend, with more institutions likely to follow.
In a follow-up to this news, on May 31, Frederica Freyberg of PBS Wisconsin interviewed David Krause, an Emeritus Associate Professor of Finance and the inaugural director of the Applied Investment Management (AIM) program at Marquette University. Krause offered his perspective on the investment, noting that the move surprised many in the investment community due to its timing shortly after the approval of multiple spot Bitcoin ETFs by the SEC on January 10.
Krause explained that spot Bitcoin ETFs allows institutions like the Wisconsin Investment Board to invest directly in regulated, highly liquid securities traded on exchanges. Despite the initial surprise, he acknowledged Wisconsin’s history of innovative investment strategies, supported by its fully funded pension status. This financial stability gives the state the flexibility to pursue long-term investments without the immediate liquidity concerns faced by underfunded pensions.
Addressing concerns about Bitcoin’s volatility, Krause pointed out that many assets within pension fund portfolios are inherently volatile. He emphasized that Bitcoin’s supply and demand dynamics are becoming more balanced, making it a viable alternative investment. Krause also noted that the pension fund’s Bitcoin investment is relatively small, representing just 0.1% of the total fund. This cautious entry allows the board to gauge public and market reactions before making more substantial allocations.
Krause highlighted the diversification benefits of including Bitcoin in the pension fund’s portfolio. Bitcoin’s lack of correlation with traditional assets like stocks and bonds can enhance portfolio diversification, potentially increasing returns while mitigating risks. Additionally, he said, Bitcoin’s limited supply could serve as an effective hedge against inflation.
Looking ahead, Krause expects other state pension funds to closely monitor Wisconsin’s experience with Bitcoin. He believes that well-funded pension systems may follow suit, while those with lower liquidity might refrain from such long-term investments. Krause also remarked that Wisconsin’s investment could legitimize Bitcoin in the eyes of other institutional investors, as evidenced by the immediate 1% increase in Bitcoin’s price following the public disclosure of the SEC filing.
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