New Zealand Fund Allocates 5% of KiwiSaver Scheme to Bitcoin

New Zealand Fund Allocates 5% of KiwiSaver Scheme to Bitcoin

New Zealand’s KiwiSaver Growth Strategy, a $350 million retirement fund managed by New Zealand Wealth Funds Management, has allocated 5% of its assets to Bitcoin. This bold move underscores the growing acceptance of Bitcoin as an investment asset among institutional investors.

The decision to include Bitcoin in the fund reflects its increasing appeal as a store of value, especially amid concerns about fiat currency inflation.

Why Bitcoin for KiwiSaver?

A Hedge Against Inflation

James Grigor, Chief Investment Officer (CIO) at New Zealand Wealth Funds Management, explained that Bitcoin shares several characteristics with gold, making it an attractive hedge against inflation.

“Bitcoin is a commodity and a good store of value against fiat inflation,” said Grigor.

Growth Potential

The KiwiSaver Growth Strategy fund targets long-term growth by investing in assets like equities, listed infrastructure, and property. Bitcoin’s rapid growth and increasing adoption align with this strategy, providing diversification and a potential boost to the fund’s returns.

Details of the Allocation

Initial Investment

• Start Date: October 2020
• Bitcoin Price at Purchase: Approximately $10,000
• Fund Size at Year-End: $244 million (December 2020)

Fund Composition

The fund’s portfolio predominantly consists of growth assets, with Bitcoin now representing 5% of its allocation.

Criticism and Confidence

Some fund managers have expressed reservations about Bitcoin’s inclusion, citing concerns over its volatility and limited use cases. However, Grigor defended the decision, stating:

“Bitcoin’s remarkable similarities to gold and its value as a hedge against inflation make it a prudent choice for long-term growth.”

Future Plans for Bitcoin in KiwiSaver

Grigor anticipates that Bitcoin’s role within the fund will grow over the next five years. New Zealand Funds Management even updated its offer documents to include cryptocurrency investments, reflecting its commitment to the asset class.

Institutional Momentum in Bitcoin

KiwiSaver’s move comes as more institutions embrace Bitcoin as a treasury reserve asset.

Notable Examples

• MicroStrategy: Purchased over $1 billion in Bitcoin in 2020.
• Tesla: Invested $1.5 billion in Bitcoin and now accepts it as payment.
• Square: Allocated significant funds to Bitcoin as part of its treasury strategy.
• Meitu and Ruffer Investment Company: Among other publicly listed firms increasing Bitcoin exposure.

These investments highlight Bitcoin’s rising credibility as an asset that can preserve value and generate long-term returns.

The Broader Implications

Increased Legitimacy

KiwiSaver’s adoption of Bitcoin signals a growing acceptance of cryptocurrencies in traditional financial markets, particularly for long-term investment strategies.

Encouraging Diversification

As more institutions add Bitcoin to their portfolios, its reputation as a legitimate investment asset continues to strengthen, encouraging others to diversify their holdings.

Conclusion

The inclusion of Bitcoin in the KiwiSaver Growth Strategy fund represents a significant milestone in the adoption of digital assets by institutional investors. By viewing Bitcoin as a hedge against inflation and a store of value, New Zealand Funds Management is setting an example for other investment funds worldwide.

As Bitcoin gains traction among corporations and fund managers, its role as a mainstream investment asset is becoming increasingly undeniable.

To learn more about the innovative startups shaping the future of the crypto industry, explore our article on latest news, where we delve into the most promising ventures and their potential to disrupt traditional industries.