General Electric (GE) has decided to freeze its pension plan, removing two of the key features that have come to be associated with retirement savings – secure and guaranteed – for tens of thousands of employees. GE isn’t the first company to pull the plug, but as one of the oldest traditional companies in corporate America, it sends a strong signal to employees that they can no longer bank on their employer for retirement benefits.
Now, instead of shouldering the risk for employees, GE will essentially shift that risk back to its workers by contributing a percentage of employee salaries into a 401(k) plan, whose investments are selected by the individual from a list screened by the employer. By heaping more risk on investors, companies like GE are doing their employees a favor by potentially sending them into the arms of bitcoin. If you’re going to inherit risk, you might as well choose an asset with an attractive risk/reward ratio, right? And with 115% year-to-date returns, no asset can touch bitcoin in 2019 so far – even factoring in the recent crypto market crash.
While there may not be any bitcoin ETF on the market just yet, which incidentally would make gaining exposure to BTC in a 401(k) plan that much easier, where there’s a will there’s is a way. And by taking a look at the returns of hedge funds this year, it’s clear to see why bitcoin is such a unique asset.
Hedge funds, which are known for their lofty two-pronged fee structure of 2 and 20 percent for management and performance, respectively, have delivered less than 5% returns in 2019 through September, according to data cited in Bloomberg. Even the stock market is up more than that at roughly 21%. Incidentally, risky hedge funds were once considered a taboo investment among retirement funds before investment officers realized these funds could deliver alpha for them. It’s not outside the realm of possibility to suggest bitcoin could muscle its way into 401(k) funds next.
Meanwhile, a new Bank for International Settlements (BIS) report has uncovered something the crypto community could have told you all along. The ballooning of central banks’ balance sheets has been damaging to the soundness of the financial markets.
With so much uncertainty plaguing the global economy not to mention corporate America, it’s getting more difficult for investment officers to ignore bitcoin. They don’t have to shake up their entire asset allocation, as market leaders recommend starting with a modest exposure as low as 1%-2%. BTC may be a risky asset, causing eager investors to come back to earth after a recent market downturn, but as Twitter user Roland points out on Pomp’s thread:
“They can’t freeze bitcoin.”
Last modified: July 13, 2020 9:31 PM UTC