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Cryptocurrencies are getting a cool reception in Australia’s A$3.3 trillion ($2.4 trillion) pension fund industry, underlining the challenge digital assets face to win significant investment from retirement savings.
Long-term funds have to watch how the crypto sector develops, but extreme price swings make virtual currencies “too risky to be considered for institutional portfolios,” Ross Barry, who oversees A$27 billion as chief investment officer of superannuation fund Spirit Super, said in an interview.
“It’s still volatile and there are still significant governance risks around things like even down to how do you have custody,” Barry said. “I don’t think it’s fit for purpose for superannuation funds.”
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Some pension funds globally have committed relatively small amounts to the nascent asset class, for instance in the U.S., but such public announcements are relatively few and far between. Crypto supporters argue it’s a matter of time, pointing to diversification benefits and surveys such as one from Fidelity Investments Inc. suggesting most institutions are interested and plan crypto allocations by 2026.
Crypto volatility has been in full display this month. Bitcoin surged to a record of almost $69,000 on Nov. 10, boosted by optimism around the launch of the first Bitcoin-linked exchange-traded fund in the U.S. It has since tumbled back to about $58,000.
Crypto-stocks linked ETFs have been rolled out in Australia in recent weeks. Providers including VanEck Associates Corp. and BetaShares Holdings Pty are looking at launching ETFs providing exposure to spot Bitcoin and Ether prices as local regulations evolve.
For pension and other funds, investing in tokens via regulated ETFs can fit into a “multi-asset portfolio with a lot more transparency,” Alistair Mills, director of institutional business and capital markets at BetaShares, said in an interview.
Closed Wallet
Allocation to crypto in self-managed Australian pension funds remains tiny
Source: Australian Taxation Office, Bloomberg
Note: Represents share of self-managed superannuation assets invested in cryptocurrency. Data first disclosed in 2019.
It remains to be seen how much of a difference such products would make. In self-managed pension funds -- where there’s arguably a higher likelihood of investment in crypto -- just A$212 million is invested in digital assets from a pool of A$822 billion, according to Australian Taxation Office data.
Barry at Spirit Super is continuing to research virtual currencies, especially central bank digital currencies, which could lead to a crypto shakeout and bring legitimacy to the private tokens that survive.
“It would be remiss of us not to keep a weather eye on the potential for cryptocurrency to become a more relevant part of the global currency system,” Barry said. “We’ve just taken the view that it’s just still too untested.”
