Development in cryptocurrency regulations and greater recognition of the potential of blockchain technology is gradually increasing interest in cryptocurrency assets by larger investors, AMP head of portfolio management Stuart Eliot said in a recent panel session.
AMP Super was the first super fund to invest in cryptocurrency, adding bitcoin futures into its dynamic asset allocation program in May last year. The exposure to the asset class has so far generated positive results for the fund.
Speaking at the Australian Wealth Management Summit on Friday, Eliot said that one of the trigger points for AMP Super deciding to allocate a small exposure to this asset class was the approval of cryptocurrency exchange-traded fund (ETF) products by the Securities and Exchange Commission in the US.
“That event gave the asset class institutional legitimacy and that triggered us to conduct research into whether we could build effective trade models for that. That took about three months and we then got all the necessary approvals to go live,” Eliot said.
AMP views cryptocurrency as a positive investment case not just in terms of the increased allocation it’s expected to receive but in terms of developments in areas such as stablecoins and how that might transform the financial system.
While the super fund currently trades bitcoin futures in order to invest in the asset class, Eliot said AMP Super was “on a path to using an ETF”.
“[However], there’s various things that we need to tick off on the road to get there,” Eliot said.
From an individual, retail investor perspective, Eliot suggested that ETFs are probably one of the more secure and straightforward methods of getting an exposure to the asset class.
“They’re APRA-regulated and if you just wanted to invest in a specific coin such as bitcoin, there’s five or six ETFs you can choose from,” he said.
For investors that want something more sophisticated, Eliot said they would be better off using a more specialised custodian service provider.
Speaking on the same panel, Global X senior product and investment strategist Marc Jocum agreed that ETFs had played an important role in making cryptocurrency investments more accessible as dealing with exchanges directly had deterred many retail investors from gaining exposure to cryptocurrency assets.
“A lot of financial advisers consider ETFs synonymous with safety, even though the things that go into ETFs can be volatile but that really provided the green light for adoption around cryptocurrency because it was quite difficult to get access before,” Jocum said.
Jocum noted that while cryptocurrency ETFs in Australia have seen strong growth, hitting over $1 billion, the growth has been even more significant in the US where the cryptocurrency ETF market is now above $300 billion in total.
“In Australia, we’ve had around $400 million in flows over the last year [into crypto ETFs], in the US, that happens in around a week,” he said.
“So, there’s a lot of adoption happening in crypto, and it’s not just retail investors or advisers buying it. You’ve got sovereign wealth funds buying cryptocurrency in their portfolio as well.”
