David Krause, a finance professor at Marquette University, believes that the State of Wisconsin Investment Board’s (SWIB) initial investment in Bitcoin exchange-traded funds (ETFs) is just a preliminary step. According to Krause, this move is a way to test public reaction, with potential for further investment.
Initial Investment and Strategy
Earlier this year, SWIB added two spot Bitcoin ETFs to its portfolio: BlackRock’s iShares Bitcoin Trust (IBIT) and Grayscale’s Bitcoin Trust (GBTC). As of March 31, these investments were valued at $164 million, according to a U.S. Securities and Exchange Commission filing in May. Krause notes that this is likely just the beginning for Wisconsin’s pension plan in the crypto space.
An Innovative Approach
In an interview with PBS Wisconsin, Krause highlighted SWIB’s history of innovation. “Wisconsin’s investment board has always been innovative,” he said. “This is a fully funded pension fund, so they have the luxury of investing for the long term. They don’t need to worry as much about liquidity as, say, the pension fund for the state of Illinois, which is only funded at 50% of its level.” As of the end of 2023, SWIB managed approximately $156 billion in assets, making its Bitcoin ETF holdings a negligible 0.1% of its total portfolio.
Future Prospects
Krause believes SWIB’s current investment is just “a toe in the water” and expects the board to increase its holdings in Bitcoin ETFs. He also anticipates that other pension funds will follow suit. “I think it’s just an entry point. I think they’re testing to see the reaction of the public to whether or not there’s resistance to owning this, and they’re using it as a trial run because it really is not going to impact the portfolio substantially until you get to maybe a 1% or 2% positioning,” he said.
Also Read: Spot Ethereum ETF Approval Could Benefit Bitcoin: Michael Saylor
Broader Institutional Interest
In the first quarter of the year, nearly 500 institutional investors revealed allocations into spot Bitcoin ETFs. The largest holder as of March 31 was hedge fund Millennium Management, with $2 billion in holdings across various funds, representing roughly 3% of its total assets under management.
The State of Wisconsin Investment Board’s initial foray into Bitcoin ETFs marks the beginning of what could be a significant shift in pension fund investments. As public reaction is assessed, further investments in digital assets may follow, potentially influencing other institutional investors to explore similar opportunities.
