A quarter-billion-dollar precious metals fund is now investing in bitcoin, and it’s funneling the profits back into gold and silver assets. The Old Mutual Gold and Silver Fund, which handles a portfolio of precious metals equities worth about $220 million, told Bloomberg in an interview last week that it has officially succumbed to the cryptocurrency craze. The firm began scooping up bitcoin back in April.
The Old Mutual Gold and Silver Fund is headquartered in the UK. It mainly invests in equity securities from companies that operate in the gold and silver sector – firms engaged in exploration, development and production.
The fund is pretty dynamically managed. It balances investments in gold and silver bullion listed funds with gold and silver equities, depending on which would benefit from the most exposure. Only about 20 percent of the firm’s holdings are held as physical metals.
According to the fund’s manager, Ned Naylor-Leyland, there is now a mandate to channel as much as 5 percent of their investments into digital currencies. The earnings generated from the appreciation of its digital assets will be re-invested into gold and silver equities.
The price of bitcoin is up more than 700 percent this year. It even surpassed the price of gold for the very first time back in March – about one month before the fund began participating in the cryptocurrency market.
According to Naylor-Leyland, bitcoin was originally designed to serve as a digital form of gold. He says that if there’s going to be a fund with a small percentage invested in bitcoin, it should be in a gold fund.
“Bitcoin’s frictionless and immediate blockchain payment system resolves the criticism of gold as lacking divisibility and having problems with ease of transmission,” said Naylor-Leyland. “I believe this recognition of a differentiated form of payment will bring the ownership of disciplined money into the modern world, paving the way for the return of gold as a global currency.”
It’s debatable whether or not gold will make a comeback in the way this fund manager is hoping for. but his views on cryptocurrency are notably upbeat, especially compared to some of his peers in the financial sector.
JPMorgan’s CEO, Jamie Dimon, called bitcoin a “fraud” that would eventually collapse. Meanwhile, Credit Suisse’s CEO Tidjane Thiam referred to the digital currency as “the very definition of a bubble.”
It will be interesting to see how many detractors end up changing their tune, especially as the price of bitcoin continues to soar and more people start taking it seriously. For the moment, at least some players – like The Old Mutual Gold and Silver Fund – are seizing this pretty lucrative opportunity.
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