Cryptocurrency has become the most viable investment in the past and seems headed to stay as such in the long run. Global crypto adoption has increased by more than 880% in the past year. At the same time, more than 70% of institutional investors are planning to invest in cryptos over the next 12 months. These are the indications that show that crypto is the future of investments.
With this knowledge, Australian superannuation funds are also encouraged to become part of this new investment option or risk being left behind.
Most institutional investors took time before embracing cryptocurrencies. However, with time it became apparent that digital currencies have become so functional and crucial to the traditional economy. Most people were relying on it as the traditional assets struggled following the coronavirus pandemic. As some of the crucial stakeholders in the economy, cryptos have been boosted following mainstream acceptance and that of the institutional investors.
The Australian Institute of Superannuation Trustees (AIST) 2021 conference crypto talks established that cryptos are viable investment options for superannuation funds. While most of these entities still consider the crypto risks of underperformance, they are urged to consider blockchain-based assets as an emerging asset class.
Chloe White, Genesis block managing director, observed that failing to embrace digital assets was setting up the funds for failure. She compared the current crypto landscape to that of the early internet days. While some entities never thought it was viable, some embraced it fully. Those who took it up benefited while the others were still playing catch up years later. Also, the world is currently unimaginable without the internet.
10 years later, a fund that fails to expose its investments to crypto would most likely be underperforming.
Why are Australian superannuation funds not investing in crypto?
Given that Australia is one of the earliest countries to legalise crypto, it might seem ironic that the Australian superannuation funds are not taking up crypto investments. The truth is that there are legit concerns why most are yet to embrace digital currencies.
Superannuation funds are more risk-averse compared to other institutional investors. These funds are managed on behalf of the contributors. While it is okay to invest for more returns, there is a need for more assured returns, which cryptos are not known for. The cryptos are highly volatile and are unregulated.
How should the Australian superannuation funds invest in crypto?
Even though the superannuation funds have taken time to embrace cryptos, they will soon become inevitable. Not unless they want to risk operating at a loss years later. Therefore, the best way to invest in crypto assets is to start small. They can only have a portion of their assets, not more than 5% on cryptos. Given cryptos are not assured on returns, losing 5% will not hurt the funds as much.
Once invested, they should also consider it more of a long term prospect. Therefore, there is a need to choose crypto with long term viability.
Already there are various platforms like CoinSpot or New Brighton Capital that support the superannuation funds looking to invest in cryptocurrencies. They assist in choosing the ideal crypto and also work on things like filing tax returns, audit and accountancy.