UK Pension Fund Cartwright Makes 3% Bitcoin Allocation

British pension fund specialist and scheme advisor, Cartwright, has announced the first ever defined benefit (DB) portfolio allocation into Bitcoin, as reported by Corporate Advisor. 

A defined benefit fund is a type of superannuation scheme in which the expected benefit is explicitly defined by a predetermined formula, as opposed to an accumulation fund — like most Aussies have — where you make regular contributions but your nest egg value at retirement varies based on how much you accrue and investment gains.

Cartwright didn’t provide the name of the scheme set to invest in Bitcoin, but it did say that between 2 and 3% of the unnamed scheme’s assets will be allocated to Bitcoin — a surprisingly high number.

Meanwhile, across the pond in the US, Michigan’s state pension fund has become the first in the US to invest in Ethereum ETFs, pouring a total of US$11 million into Grayscale’s Ethereum Trust and Ethereum Mini Trust ETFs.

Related: World-largest State Pension Fund “Unintentionally” Buys Bitcoin

Pension Fund Moves Into Bitcoin in a Big Way

Glenn Cameron, Cartwright’s head of digital assets, told Corporate Advisor the decision to allocate assets to Bitcoin came after a long consultation process with the scheme’s trustees in which ESG (environmental, social and governance) considerations, investment strategy and security issues were all weighed. Laying out the investment case for the scheme getting into Bitcoin, Cameron said:

The logic is that it is an asymmetric investment opportunity. If you put in 2 per cent, the maximum you can lose is 2 per cent – if it goes to zero. But the upside is potentially significant. If you look at the correlations of bitcoin with 14 other asset classes, the 60-day correlation centres around zero. Investors need certain investment horizons, and it needs to fit within their risk appetite.

Glenn Cameron, Head of digital assets as Cartwright

Notably the scheme will be investing in Bitcoin directly, not through an ETF. The Bitcoin will be secured using an arrangement whereby the Bitcoin vault’s private key is split up and portions held by five separate independent entities. 

Cameron says he believes Bitcoin is entering into a two decade growth cycle, where the price of the OG crypto will continue to climb driven by its increasing scarcity.

In addition to the defined benefits scheme, Cartwright is set to launch other Bitcoin-based pension products, the first of which is a Bitcoin workplace savings proposition known as ‘Cartwright Bitcoin Employee Benefits’, which will enable employers to pay Bitcoin directly into wallets held by their staff. 

The firm is also creating a product allowing unlisted companies to offer Bitcoin to employees, similar to restricted stock units for employees of listed companies — Cartwright calls this ‘restricted Bitcoin units’. 

If you are an unlisted company you can’t give shares because you are illiquid. But you can do it with Bitcoin – we call them restricted bitcoin units, held in an escrow account and the employee gets them after three years.

Glenn Cameron, Head of digital assets as Cartwright

Michigan State Fund Apes Into ETH

In related news, a Securities and Exchange Commission (SEC) filing has revealed that the Michigan State Pension fund has become the first such fund in the US to invest in Ethereum ETFs.

According to the SEC filing, the fund — known formally as The Michigan State Retirement System — now holds 460,000 shares in the Grayscale Ethereum Trust (ETHE), which at the time of writing was valued at just over US$10 million (AU$15.1m), and 460,000 shares in the Grayscale Ethereum Mini Trust, worth approximately US$1.1 million (AU$1.6m).

The fund had previously disclosed investments in Bitcoin, with its latest SEC filing showing it currently holds 110,000 shares in ARK 21Shares Bitcoin ETF (ARKB), currently valued at around US$7 million (AU$10.6m).

Related: Bitcoin Adoption Accelerates as Michigan State Pension Fund Snatches up $6.6 Million in BTC

The fund’s diversification into Ethereum may reflect an increasing interest from institutional investment funds in the broader digital asset landscape outside of Bitcoin.