NEW YORK (Reuters) – The rollercoster experience in bitcoin for the reason that begin of the yr has not dampened wealth supervisor Jim Paulsen’s enthusiasm for the cryptocurrency.
But Paulsen, chief funding officer for Leuthold Group, which manages $1 billion, can not personal bitcoin in shopper portfolios resulting from regulatory constraints. This has left him on the sidelines watching the world’s hottest cyrptocurrency surge greater than 900% since its March lows in unstable buying and selling that additionally noticed bitcoin lose greater than 20% within the span of some days.
“What I like about bitcoin is… its correlation to shares and different belongings is awfully unbiased,” stated Paulsen, who stays annoyed that he can not personal it for purchasers.
The promise of an asset class that behaves in another way than shares or bonds is leaving portfolio and wealth managers scrambling personal cryptocurrencies if they’ll.
Many view bitcoin as a very good inflation hedge. Practically 20% of advisors are considering investing in cyryptocurrencies this yr resulting from considerations about inflation, up from 6.3% in 2019, in keeping with a report from Citi.
Nonetheless, a lot of advisors say they’re unable to personal bitcoin for his or her purchasers till they’ll maintain it in an exchange-traded fund or mutual fund that clears authorized hurdles frequent for any funding.
Ought to that occur, institutional cash may stream in and push the asset class greater, analysts stated.
BlackRock Inc, the world’s largest asset supervisor, stated on Jan. 21 it was including bitcoin futures as eligible investments for sure funds. Fund specialists count on different asset administration companies to comply with go well with.
But the U.S. Securities and Alternate Fee doesn’t but acknowledge cryptocurrencies as a safety like a inventory or a bond, and has not dominated whether or not mutual funds can personal them straight, stated Robert Jenkins, world head of analysis at Refinitiv Lipper. So it stays unclear whether or not any mutual funds at the moment personal bitcoin as a result of they aren’t required to reveal it, he stated.
In the USA, eight companies have tried with out success since 2013 to create a bitcoin ETF, in keeping with Todd Rosenbluth, director of ETF and mutual fund analysis at New York primarily based CFRA.
The SEC didn’t reply to questions for this text.
Funds like the favored ARK Make investments ETF line which have positions in bitcoin do it via shares of the Greyscale Bitcoin Belief, a publicly traded belief that holds a set variety of bitcoin items and sometimes trades at a premium to the worth of its underlying portfolio.
Securities regulators in Canada authorised the world’s first bitcoin ETF on Feb. 12, main some buyers to hope that U.S. regulators will shortly comply with.
President Joe Biden’s nominee to move the SEC, Gary Gensler, spoke in broad phrases about crytocurrencies in a affirmation listening to Tuesday, suggesting that the company ought to present extra regulation on the way it views the asset class. Some buyers have taken his appointment as elevating the probability {that a} bitcoin ETF will probably be authorised for the U.S.
Gensler “appears extra crypto-friendly than earlier people who had oversight,” stated Viraj Patel, head of asset allocation at Fiduciary Belief Worldwide, who has not but made investments within the asset class for purchasers however is ready for a U.S.-based ETF. “We’re actually taking a look at cryptocurrency via the lens of this could possibly be gold 2.0,” stated Patel.
Nonetheless, Rosenbluth stated he was skeptical of a product being authorised this yr, saying there could be a excessive bar to clear tied to market manipulation and custody audit.
Even within the absence of an ETF, retail curiosity “stays robust with no indicators of abating,” JP Morgan analysts wrote in a Feb 16 analysis notice.
Total, cyptocurrency funds and merchandise that buyers should purchase direct introduced in almost $5.6 billion in belongings in 2020, up greater than 600% from the yr earlier than, in keeping with asset supervisor CoinShares. Cryptocurrency funds have gathered $4.2 billion in flows for this yr via March 1, Coinshares stated.
“Not permitting the acquisition of cyrpto is one thing that’s irritating to many advisors, nevertheless it’s such a unstable asset that many buyers find yourself doing it on their very own,” stated Jimmy Lee, chief govt of the Wealth Consulting Group.
Reporting by David Randall; enhancing by Megan Davies, Ira Iosebashvili and David Gregorio
