In a pioneering move for the UK pension industry, Cartwright, a specialist in defined benefit and hybrid pension schemes, announced a notable investment in Bitcoin within one of its client’s portfolios.
This strategic decision, disclosed on November 4, involves a 3% allocation to Bitcoin, underscoring a shift toward innovative asset classes within retirement portfolios. The investment process began in October and included extensive training and due diligence to ensure compliance with security standards and risk management protocols.
Sam Roberts, Cartwright’s Director of Investment Consulting, emphasized the strategic approach taken by the trustees, pointing to Bitcoin’s potential to yield high returns even with a modest allocation. The trustees sought to acquire an asset with systematic risk that deviates from the overall market, with the view of obtaining high long-term returns consistent with the pension scheme's objectives. This allocation is the first in the UK pension sector and may open other similar examples.
Adding Bitcoin to a traditionally conservative pension scheme required careful precautions and a strategy for managing its volatility.
Cartwright’s Head of Investment Implementation, Steve Robinson, discussed how Bitcoin's volatile markets require safe custodians. In this way, the strategy periodically provides for the liability of profits, and the potential gains imply reasonable risks; hence, the plan is possible even for the most risk-averse investor.
Robinson also pointed out that a solution has been developed for accessibility, where various pension schemes can participate without meeting high minimum investment hurdles. Such an approach could enhance the possibility of Bitcoin investments across different pension fund investment portfolios, making them easier than early high-entry investments. The concept shows that Cartwright wants to diversify the conservative business by introducing more progressive and safe investment solutions.
The addition of Bitcoin to this UK-based pension fund aligns with a trend observed among other institutional investors worldwide. Pension funds of countries such as the United States of America and South Korea have recently invested in digital assets. For instance, South Korea’s pension service revealed that it invested in Bitcoin by investing in MicroStrategy, while the Michigan state pension fund invested in Bitcoin and Ether ETFs.
This confidence is well manifested by new awareness of cryptocurrency as a diversification tool, especially during periods of economic volatility. On the other hand, other companies in the UK like Legal and General have looked into tokenized funds, which shows that there is a growing willingness to adopt blockchain-based financial assets.