Picture: BLOOMBERG/SIMON DAWSON
Picture: BLOOMBERG/SIMON DAWSON

Old Mutual Global Investors, the UK-based asset manager, is taking positions in cryptocurrencies, such as bitcoin, through its Gold and Silver Fund, Bloomberg reports.

The fund, which manages $216m in mostly listed equities, started buying bitcoin in April, with a mandate to allocate up to 5% to cryptocurrencies, manager Ned Naylor-Leyland told Bloomberg on Thursday. The plan was to take profit from bitcoin as the price rose and reinvest it in gold and silver assets.

The bitcoin price exceeded the gold price for the first time in March. While the price of gold is up 8.7% over the past year, bitcoin has shot up 1,000%. This has caused many to label the cryptocurrency a bubble, although pundits point out that less than 1% of the world’s population owns it, suggesting that the price could rise further.

“The more the value of bitcoin goes up, the more seriously people are taking it,” said Chris Becker, an economic strategist at Investec Bank. Domestic fund managers were not yet investing in cryptocurrencies, although some global hedge funds were beginning to, he said.

It made sense to hold bitcoin in a precious metals fund, as the cryptocurrency’s characteristics were based on the same underlying principles as gold’s, said Becker. “Bitcoin’s supply curve declines geometrically over time, and although it’s not widely accepted as a medium of exchange, it could be used as a store of value. One is still exposed to high-price volatility, which is a feature of all nascent and shallow markets.”

Bitcoin could compete with gold as a global reserve or settlement asset, he said.

“Where gold is cumbersome to physically trade across the world, making large value payments in bitcoin is almost as easy as sending an e-mail.”

It was likely that the Old Mutual Gold and Silver Fund was taking a position in bitcoin to enhance its overall returns, Becker said.

Deon Gouws, chief investment officer at Credo Wealth, said the decision was “peculiar and not true to label. A typical gold fund investor wouldn’t invest in bitcoin, and vice versa.”

While Gouws owned the cryptocurrency in his personal capacity, it was not included in Credo Wealth’s basket of funds, which were targeted at conservative investors who wanted to protect their wealth rather than “get rich quick”.

Bitcoin was trading at $8,230 late on Wednesday, up from $736 a year go.

ziadyh@businesslive.co.za

 

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