In a LinkedIn post this week, Steve Flegg, senior portfolio manager at AMP, explained that crypto had become “too big” and its potential “too great” to ignore any longer. As a result, AMP decided to invest a portion of its retirement assets in Bitcoin.
Speaking to InvestorDaily, Stuart Eliot, head of portfolio management at AMP, clarified that after “testing and careful review by our team and investment committee”, the firm decided to include ” a small risk-controlled position” in digital assets within its Dynamic Asset. Allocation program earlier this year.
“The exposure, which represents approximately 0.05 percent of our total pension assets under management, recognizes structural changes in the sector over the past year, including the launch of exchange-traded funds by major fund managers. “international investment,” Eliot said.
“While our super members have benefited from this exposure, we fully appreciate the risk and volatility characteristics of this emerging asset class and will continue to carefully manage our holdings, which constitute only a fraction of a composition of very diversified assets.”
In October, Jonathan Armitage, chief investment officer at Colonial First State (CFS), said that despite cryptocurrency’s meteoric rise over the past year, the volatile asset class lacks the right characteristics to be included in a retirement portfolio.
“[Crypto] was very volatile. You’ll hear so many stories from people about when they made gains. These same people tend to stay pretty quiet when crypto or bitcoin goes down,” Armitage said.
“I think it’s worth reminding people that there have been several occasions where cryptocurrencies have fallen by more than 60 percent in a very short period of time, we’re talking weeks.”
According to the ASX Australian Investor Study 2023around 15 percent of Australian investors hold cryptocurrencies and almost 30 percent of potential investors want to invest in cryptocurrencies in the next 12 months.
However, Armitage considers cryptocurrencies to be “quite speculative” in nature, unlike more traditional asset classes like stocks and bonds, where investors, like CFS, can better assess potential future returns.
“The underlying focus has been on how will this investment help to continue to grow the wealth of members who sit within our super fund? he said.
For these reasons, Armitage said he doesn’t think the cryptocurrency’s characteristics “are the right ones to have in a retirement portfolio.”
Similarly, Brian Parker, chief economist of the $300 billion Australian Retirement Trust, expressed skepticism about committing members’ funds to cryptocurrencies like bitcoin earlier this year.
“If I think about bitcoin, even if I have access to a bitcoin ETF, why should I buy it? “It still doesn’t earn me any interest, it’s a highly speculative investment, I still can’t evaluate it fundamentally and I don’t know how it performs over a number of business cycles,” said Parker at InvestorDaily’s sister brand Super Review at the time.
“I can’t be sure whether this is a risk asset or a defensive asset and so it remains a very speculative area.”
Any decision to include Bitcoin in a portfolio would require more information on its inverse and positive correlations with other asset classes as well as understanding its behavior during different market cycles, he said .
“At that point you might be able to make a decision whether or not to include it in a portfolio, but I don’t think we’re at that point yet,” Parker said.
“From the point of view of being a super fund, our job is primarily to invest in a range of assets that generate both income and growth, and frankly that always means that stocks, bonds, private equity, real estate and private credit make quite a package. much more sense than speculative digital currencies.
