In a LinkedIn post this week, Steve Flegg, senior portfolio manager at AMP, explained that crypto had grown “too big” and its potential “too great” to ignore any longer. As a result, AMP has decided to invest a portion of its superannuation assets in bitcoin.
Speaking to InvestorDaily, Stuart Eliot, AMP’s head of portfolio management, clarified that after “testing and careful consideration by our investment team and committee”, the company decided to include “a small and risk-controlled position” in digital assets within its Dynamic Asset Allocation program earlier this year.
“The exposure, which represents around 0.05 per cent of our total superannuation assets under management, recognises the structural changes in the industry over the past year, including the launch of exchange-traded funds by leading international investment managers,” Eliot said.
“While our super members have benefited from the exposure, we fully appreciate the risk and volatility characteristics of this emerging asset class and will continue to carefully manage our holding, which is a fractional component of a highly diversified asset mix.”
In October, Jonathan Armitage, chief investment officer at Colonial First State (CFS), said that despite the meteoric rise of cryptocurrency over the past year, the volatile asset class lacks the appropriate characteristics for inclusion in a superannuation portfolio.
“[Crypto] has been very volatile. You will hear an awful lot of stories from people about when they have made gains. Those same people tend to go quite silent when crypto or bitcoin goes down,” Armitage said.
“I think it’s worth reminding people that there have been several occasions where cryptocurrencies have fallen over 60 per cent in a very short period of time, we are talking weeks.”
According to the ASX’s Australian Investor Study 2023, around 15 per cent of Australian investors hold cryptocurrency and nearly 30 per cent of prospective investors are interested in investing in crypto in the next 12 months.
However, Armitage considers cryptocurrencies to have a “fairly speculative” nature, in contrast to more traditional asset classes like equities and bonds, where investors, such as CFS, can better gauge potential future returns.
“The underlying focus has been on, how is this investment going to help continue to build the wealth of the members who sit within our super fund?” he said.
For these reasons, Armitage said that he does not believe the characteristics of cryptocurrency “are the right ones to have within a superannuation portfolio”.
Similarly, Brian Parker, the chief economist of $300 billion fund Australian Retirement Trust, voiced scepticism about committing member funds to cryptocurrencies like bitcoin earlier this year.
“If I think about bitcoin, even if I have access to a bitcoin ETF, why should I buy it? It still doesn’t pay me any interest, it’s a highly speculative investment, I still can’t value it in any fundamental way, and I don’t know how it behaves over a number of economic cycles,” Parker told InvestorDaily’s sister brand Super Review at the time.
“I can’t be sure about whether it’s a risk-on asset or a defensive asset and so, it remains a very speculative area.”
Any decision to include bitcoin in a portfolio would require more information on its inverse and positive correlations to other asset classes along with understanding how it behaves across different market cycles, he said.
“At that point, you might be able to make a decision as to whether to include it in a portfolio, but I don’t think we’re at that point yet,” Parker said.
“From the point of being a super fund, our job primarily is to invest in a range of assets that deliver both income and growth, and frankly, that still means that shares, bonds, private equity, property, private credit make a hell of a lot more sense than speculative digital currencies.”
