The first UK pension scheme to invest in bitcoin was announced this week, with consultancy group Cartwright helping construct an innovative investment model.
Specialist consultancy Cartwright advised on the allocation, which makes up approximately 3% of the £50m scheme’s investment portfolio.
The allocation is the first of its kind in the UK and took place in October after a rigorous training and due diligence process.
Steve Robinson, head of investment implementation at Cartwright, said: “The operational procedures around this bitcoin investment have been designed to maximise the security of the asset while allowing profits to be taken quickly as and when they arise.
“Our commitment to actively engage with emerging innovative technologies means we can ensure that trustees remain at the cutting edge of investment solutions.
“We are excited to be at the forefront of integrating this exciting asset into a traditionally conservative space and we are confident that this strategic move, coupled with our secure custodial approach, will provide long-term value to scheme members while offering an innovative way to reduce reliance on employer contributions.”
Rather than a traditional structure such as exchange-trade fund (ETFs), Cartwright said the allocation was held directly in “cold storage” – meaning offline – with three institutional custodians. The assets are stored using a multi-signature approach to enhance security.
This comes as the price for a single bitcoin hit £57,612 – more than $74,000 – on 6 October following the US presidential election.
It exceeded $73,000 in March, according to data from Statista, an all-time high for bitcoin. This was driven in part by the approval of bitcoin ETFs in the US, with European and Australian regulators also signing off on listed products.
Cartwright said Bitcoin’s asymmetric return profile enabled a small allocation to have a big positive financial impact, protected by extensive risk management at both scheme and asset levels.
Sam Roberts, director of investment consulting at Cartwright, said: “Trustees are increasingly looking for innovative solutions to future-proof their schemes in the face of economic challenges.
“This bitcoin allocation is a strategic move that not only offers diversification, but also taps into an asset class with a unique asymmetric risk-return profile.
“Integrating bitcoin into a pension scheme’s investment strategy is a bold step that reflects the forward-thinking nature of the trustees involved.
“We are proud to have led this ground-breaking move, which we hope will be the start of a trend for institutional investors in the UK to catch up with their increasing number of peers and competitors around the world who are already taking advantage of bitcoin’s unique attributes.”
The State of Wisconsin Investment Board became one of the first US pension funds to make a direct allocation to bitcoin when it invested earlier this year.
Further reading
Time for a bitcoin revolution for UK pensions? (19 June 2024)
