[charlesdm]

Maybe not yet as of today, but they're coming. I have a friend (wealthy family with a substantial family office) who bought into crypto at the beginning of last year.

His dad runs quite a large traditional investment fund and knows of people in his network working at pension funds that are looking at putting money into Bitcoin / Ethereum and others. The family has done private equity deals together with some of these funds (mostly raising debt financing from them).

I'm not an extreme crypto bull, but I honestly think it's still early. But there will be massive volatility along the way.

Note: not investment advice, obviously. Just my opinion.

[amscanne]

Wow, pension funds should not be doing currency speculation. That's bad.

The problem with crypto-_currency_ is that it's not a productive asset. A share of a business pays dividends over time and thus has intrinsic value (and _some_ speculative value), while a currency does not. A currency transaction is a zero-sum game, which is good because it minimizes friction.

Buying cryptocurrency with the expectation of increases isn't investment, it's _speculation_.

[charlesdm]

Crypto has been one of the better performing asset classes in the last 5 years. That is just a fact -- if looking in percentage terms.

Pension funds generally allocate up to 5% of their portfolio to alternatives, which could be smaller funds investing in art, watches, music royalty rights, farmland, wine, and the likes. This also includes crypto.

If you're an investment manager, it isn't necessarily crazy to allocate 0.2 or 0.5% of your portfolio to crypto and try to capture some of those gains.

[TFortunato]

Absolutely -- To the parent: think of it this way. If you had $200 in your fund last year to invest last year, and put $1 into crypto, then at worst, you lose that entire $1, and your portfolio is down to $199 (notwithstanding what you did with the other money), a loss of 0.5%. If you happened to pick Litecoin, and bought 0.25 LTC when they were at a stable price of $4 a piece, today that 0.25 LTC would be worth $80, giving you $280 in your fund, or a gain of 40% in your total portfolio value. You can look at ETH, Bitcoin as well and also see large gains.

Even without perfect timing of the market, it's a pretty easy decision for a portfolio manager to look at this and say: "While, like any other asset, past performance isn't an indicator of future performance, given the price history and increasing trading volume over time, the risk/reward balance skews heavily in favor of putting at least some tiny bit of money into crypto for all but the most risk-averse."

[amscanne]

You and your parent comment are describing a kind of hedge, not a material investment. That’s fine but did not seem to be what my parent was implying. Funds may just as well choose to maintain several points in cash (also not a productive asset).

The analysis presented is a bit disingenuous. If you put money into every thing that could pop 400x, you’d have no money. Pension funds in particular need to be conservative and even if they’re doing “risky” things like venture capital for example, they would want late stage funds — lower returns, lower risk.

[powvans]

I don't understand why you are being downvoted. Pointing out the difference between productive and non-productive assets is exactly what is needed at the moment.

Everyone is talking about what if scenarios where huge offshore money or sovereign wealth or whatever comes into Bitcoin YUGE. Well, ok, do you think that money is just parked somewhere or is actually invested somewhere in a productive business?

Most dollars which aren't spent on consumption are converted into equity in productive businesses. In this case, dollars are merely the unit of account. You aren't invested in dollars, you are invested in businesses that produce the things that people need and those investments are measured in dollars.

[Frogolocalypse]

> Most dollars which aren't spent on consumption are converted into equity in productive businesses.

Like real-estate?

[hrrsn]

You can take the crypto out of the above statement and it's still true - yet I know plenty of funds that speculate on currencies.

[amscanne]

You know pension funds that spend a material portion of their holdings speculating on currencies? I’m skeptical. Currency trading is zero sum and highly risky. Pension funds may keep small amount as a hedge, but to actively speculate on currencies seems like a breach of fiduciary duty.

[workthrowaway27]

I used to work for a hedge fund. Now I'm in a different industry. While many individuals at the fund were interested in cryptocurrencies, they weren't going to put client money there. In order for pension funds to invest in cryptocurrencies there have to be very liquid securities that they can invest in. Futures don't count because almost no pension fund will use them directly (though pension funds do invest in hedge funds, which might have a futures strategy).