Institutional interest in Bitcoin has been the main driver of this year’s price rally, and it just does not seem to stop. Testament to this is the approval by multi-billion dollar wealth manager Neuberger Berman to add exposure to bitcoin in its portfolio.
Another institutional fund adds Bitcoin to its portfolio
The New York-based investment management firm Neuberger Berman revealed active exposure to bitcoin in their portfolio. The asset management behemoth with $402 billion in assets under management (AUM) disclosed this information in a Form 497, necessary to comply with the Securities and Exchange Commission’s EDGAR filing system.
The fund is an industry giant, having merged with Lehman Brothers in 2003. After the collapse of Lehman Brothers in 2008, Neuberger Berman continued its operations and distanced itself from its parent company. Its filing with the SEC revealed the crypto exposure:
“Neuberger Berman Commodity Strategy Fund’s (the “Fund”) investment strategy will permit actively managed exposure to cryptocurrency investments and digital assets through (i) cryptocurrency derivatives, such as bitcoin futures and ether futures, and (ii) investments in bitcoin trusts and exchange-traded funds to gain indirect exposure to bitcoin.”
In particular, its $164 million commodities fund can invest up to 5% in bitcoin futures and funds. While exposure to ether was initially also on the table, the fund chose to file only for bitcoin. Curiously, this directly contradicts the company’s position laid out in a blog post from March, saying “an investment in cryptocurrency should not be considered part of a standard asset allocation.” The statement continued:
“We’d rather view [Bitcoin] as an option that pays off when expectations for an uncertain, inflationary future increase, and make the finite, non-human controlled supply dynamics of cryptocurrencies valuable, […] those with exposure should understand the speculative nature of their investment and — potential windfalls notwithstanding — be prepared to part with almost all their committed capital.”
Institutional U-Turn not a first
This, of course, is a course reversal that veteran crypto people have seen playing out more than once. The most famous example of this has been JP Morgan’s CEO Jamie Dimon, who called bitcoin a “fraud” that wouldn’t end well. However, the bank recently rolled out cryptocurrency exposure to its own wealth management clients, even though it was eerily quiet about the fact.
That revealed an all too well-known dichotomy by traditional finance and its position on crypto assets. On the one hand, they are seen as rivals and potentially dangerous for the entire industry, while, on the other hand, institutions need to listen to their clients’ demands. With other institutional investors like Mike Novogratz’ Galaxy Digital applying for a bitcoin ETF, there is little doubt that regulators will sooner or later have to cave to popular demand. Although not all of them seem prepared for that, notably, Australia is in dire need of change in its crypto regulation, it appears that crypto joining the ranks of stocks and bonds as traditional asset is all but a foregone conclusion. The only question appears to be: when exactly?