The first UK pension fund has invested in Bitcoin, marking a potentially significant shift in investment strategies within the industry.
The unnamed fund, guided by the British pension specialist Cartwright, has reportedly allocated 3% of its £50million assets to the cryptocurrency.
Cartwright said the allocation took place in October after a “rigorous training and due diligence process”.
Sam Roberts, director of investment consulting at Cartwright, commented: “Trustees are increasingly looking for innovative solutions to future-proof their schemes in the face of economic challenges.
“This bitcoin allocation is a strategic move that, not only offers diversification but also taps into an asset class with a unique asymmetric risk-return profile.”
The move could indicate a growing confidence in digital assets and a shift in the way cryptocurrency is viewed.
Laith Khalaf, head of investment analysis at AJ Bell, noted that, while it was “only a matter of time before a UK pension scheme bought into Bitcoin”, it isn’t likely to spark a stampede into the asset class.
He explained: “Bitcoin is notoriously volatile, and pension scheme trustees are just as notoriously risk averse. Why wouldn’t you be when you’re looking after someone else’s retirement savings?
“The FCA says those investing in Bitcoin should only do so with money they are willing to lose in its entirety. That doesn’t sound like a tagline for something that fits comfortably into a pension scheme being run on behalf of members.”
However, he said members may not actually have to bear the risk.
Mr Khalaf explained: “It’s not entirely clear whether the scheme in question is a defined benefit or a defined contribution scheme.
“If, as seems likely, it’s the former, then the risk isn’t actually borne by members, but rather by the scheme itself, and then by the employer, should assets fail to cover liabilities.”
However, he warned: “If it’s a default fund in a defined contribution scheme then returns directly impact the value of members’ pension pots. A 3% allocation might not sound like a lot, but it’s enough to make a sizeable impact on performance should Bitcoin head for the stars, or alternatively find itself on the digital scrap heap.”
