Australian pension fund considers crypto investment

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One of Australia’s largest pension funds has said it may make small investments in the cryptocurrency sector, in another sign that retirement vehicles are taking the digital asset space seriously despite the regulatory risks.

Queensland Investment Corporation (QIC), which manages A$92.4bn ($69bn) of assets and is Australia’s fifth biggest pension fund, told the Financial Times that it is open to investing in cryptocurrencies in the future. A number of family offices and other private investors in the country have already invested in digital assets, but Australia’s so-called “supers”, which pool together and manage the retirement savings of millions of people, had until now declined to take the plunge.

Early inflows in to digital assets are likely to be “more a trickle than a flood”, according to Stuart Simmons, QIC’s head of currencies, as uncertainty persists about how far governments and watchdogs will intervene in the fast growing but largely unsupervised crypto space.

For conservative pension fund managers, a move into cryptocurrency markets would mark a big departure from their more conventional asset allocation strategies. They have so far largely stayed away from crypto markets, with a few exceptions. Two US pension funds based in Virginia have taken the plunge, while CDPQ — Canada’s second-largest pension fund — recently co-led a $400m funding round for crypto lending platform Celsius Network.

In Europe, large managers are reluctant to engage publicly with the space due to the high reputational and regulatory risks associated with digital assets.

“I don’t think there’s an inevitability about super funds and the institutional market investing in crypto, but as the segment matures . . . there’s a likelihood that super funds seek out exposure,” Simmons told the FT.

Cryptocurrency markets have exploded in size in the past year in a rally that has caught the attention of yield hungry investors around the world. In late September, the Victor Smorgon Group, the family office of the Australian industrialist family, said it had taken an equity stake in Melbourne-based digital asset manager Zerocap, a year after the billionaire’s wealth manager first invested in bitcoin.

Various risks remain in the crypto universe, however, that may deter big funds from jumping in. “Right now there are a number of uncertainties, and the operational infrastructure for institutional investing remains immature,” said Simmons, adding that the largest investors will want more certainty on the regulatory front and more protections around “unquantifiable risks” such as fraud, theft and market manipulation.

But conservative investors will feel more comfortable with investments once regulatory requirements become clear, Simmons said, and the industry matures from a Wild West market to a more professional one. He noted that the entry of large banks and other financial institutions “highlights the perceived opportunity from the enablement of crypto investing”.

“As the framework continues to develop, super funds may eventually simply be responding to user demand by facilitating investment in crypto,” he said.

Not all the funds are convinced. Andrew Fisher, the head of asset allocation at Sunsuper, another Queensland based pension fund manager with A$85bn ($63bn) of assets under management, said it is interested in the technology underlying cryptocurrencies but bitcoin and other coins are “not an area of interest or focus”.