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Hedge, Pension Funds in BTC: How to Check if Your Investment Manager Has Invested in Bitcoin ETFs

Published May 24, 2024 1:30 PM
Teuta Franjkovic
Published May 24, 2024 1:30 PM

Key Takeaways

  • The introduction of spot Bitcoin ETFs has been particularly impactful for hedge funds and pension funds.
  • The mandatory SEC Form 13F filings provide a transparent window into the institutional adoption of Bitcoin ETFs.
  • Over 600 financial institutions reported billions in investments in Bitcoin ETFs in the first quarter of 2024 alone.
  • The motivations behind holding Bitcoin ETFs vary widely among institutional investors.

The approval of spot Bitcoin ETFs in the U.S. in January 2024 heralded a new era of cryptocurrency integration into mainstream investment portfolios, particularly for hedge funds and pension funds.

A new way to add crypto exposure to major institutional funds led to many investing in Bitcoin ETFs and other products. It becomes a lot more transparent when public Form 13F filings  with the U.S. Securities and Exchange Commission (SEC) are open to show when cryptos are part of the portfolio.

These filings are required from institutional investment managers who manage over $100 million in assets and provide details on their holdings in publicly traded securities, including Bitcoin ETFs. Thus, by examining 13F filings, individuals are in a position to see all assets, including crypto, that they are exposed to.

SEC Filings Showcase Over 1,000 Firms with Billions in Bitcoin

Recent reports indicated that, following a recent deadline to file first-quarter 13F reports with the SEC, roughly 1,000  filers held shares in the ETFs.

Among the prominent buyers that emerged were hedge funds like Millennium Management, which held approximately $2 billion worth of shares in at least four Bitcoin ETFs. Other notable investors included Steven Cohen’s Point72 Asset Management, Elliott Investment Management, and Citadel Advisors.

The investment diversity spanned different geographies, from the State of Wisconsin Investment Board to the Bank of Montreal, involving regions from Hong Kong to the Cayman Islands, Puerto Rico, and Switzerland.

The increasing involvement of pension funds in the cryptocurrency market, including significant investments in Bitcoin and other cryptocurrencies, is seen as a highly positive development for the sector. Their entry into this market indicates a significant endorsement of cryptocurrencies’ potential as a legitimate asset class, suggesting a broader acceptance and integration of these digital assets into traditional investment portfolios.

As mentioned, Wisconsin’s state pension fund has become the first of its kind to publicly invest in Bitcoin, allocating $160 million to two recently launched Bitcoin ETFs.

Motivations Vary For Bitcoin Fund Investment

These reports of more than 1,000 filers provide only a momentary glimpse at the end of the first quarter. The reasons behind these holdings vary, and it’s impossible to interpret the motivations without direct confirmation definitively.

Investors in BTC ETFs
Credit: Bloomberg

Not all holders might be bullish on Bitcoin; some might have engaged in trades aimed at capitalizing on the cryptocurrency’s volatility or offsetting a short position in derivatives.

Others might have utilized the ETFs for basis trades, exploiting price differentials between spot and futures markets without direct involvement with Bitcoin. Additionally, some investment strategies might be driven by quantitative models, implying that the investments do not necessarily reflect any assessments of Bitcoin’s underlying value.

A Cautious and Methodical Approach

Since the launch of Bitcoin ETFs, the initial filings reveal Wall Street’s burgeoning interest in the largest digital asset. Stephane Ouellette, CEO of FRNT Financial, highlighted  that the rise of Bitcoin ETFs extends beyond retail trader participation. The filings show that portfolio managers, institutional investors, and banks are beginning to explore Bitcoin ownership, though retail investors still predominantly hold most of Bitcoin ETF shares.

This cautious entry into the cryptocurrency space by institutional players suggests a methodical approach to understanding and integrating this asset class into broader portfolios.

Matt Hougan of Bitwise Asset Management notes  that professionals often start with a small personal investment in new asset types like Bitcoin ETFs before recommending them to clients. This strategy allows them to familiarize themselves with the asset’s behavior and potential implications for investment portfolios.

The prominence of BlackRock’s iShares Bitcoin Trust (IBIT) and the Fidelity Wise Origin Bitcoin Fund (FBTC) in these filings underscores their significant role in the market.

For instance, around 420 firms reported holdings in IBIT, making it a leader in market inflow. In contrast, Bloomberg analyst Eric Balchunas said  that other ETFs launched in the same period saw much lower adoption, averaging only three to five holders.

Noelle Acheson suggests  that adopting new asset classes like Bitcoin ETFs occurs in stages. Many institutions are still conducting due diligence and onboarding processes. She anticipates that investment interest will surge alongside market recovery, noting that the market has been directionless for some weeks. This gradual expansion in institutional interest in Bitcoin ETFs mirrors the early days of the first gold ETFs, which also saw incremental growth in professional investment following their launch.

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