Yerevan (CoinChapter.com) — It is time pension funds start taking Bitcoin seriously.
According to Samson Mow, chief strategy officer/chief technical officer at Blockstream, cited issues prevalent in the pension markets in a statement released Monday, primarily as returns on the once-considered safest investments dry up. The prominent analyst noted that Bitcoin could easily fill the missing link that has separated profits from the pension sector so far.
“The only way pension funds will be able to provide for their pensioners is if they buy Bitcoin,” Mow tweeted in a follow up to a statement earlier this year, wherein he suggested traditional pensioners offset a portion of their hedge fund risks by buying Bitcoin.
“The solution isn’t to bail out the crooks,” he had added.
The Issues Facing Pension Industry
Just recently, one of Ohio’s largest public pension funds, the State Teachers Retirement System, lost more than half a billion dollars on a private equity investment in Panda Power Funds. That is just one of many problems now affixed with the pension industry as it ventures into negative-yielding debts to highly risky but artificially inflated financial markets.
In retrospect, each pension system consists of assets ranging from stocks to real estate to bonds to commodities. These systems have alternative investments that include the capital managed by hedge funds or private equity managers. That makes the process of generating returns heavily reliant on a cascade of catalysts. If one investment returns losses, the rest of the building blocks attached to that investment fall in tandem.
Pension funds are facing similar challenges in the market today. There are many reasons why citizens might not see their returns. Employer bankruptcy is not the last reason on the list. But today, many benefit-defined pension plans are having trouble firstly because of underfunding.
In other words, they don’t have enough money to pay up in the future and meet their obligations.
People who have to rely on labor unions for their pension, i.e., are part of multiemployer pension plans, are in more trouble than the rest. Unfortunately, there are plenty of examples of how pension funds could not pay up fully and factually failed their duties, like the General Electric pension shortage and the Lumber Industry pension plan. This can happen for many reasons, such as mismanaging the funds and poor investment.
Unlike pension funds, Bitcoin remains a risky but hugely uncorrelated asset that could offset some risks in an investment portfolio. Mow hints that the cryptocurrency could limit labor and employee classes’ exposure to the mistakes done by a handful of money managers.
Is BTC Too Risky?
Forbes reported that having bitcoin integrated into a pension fund remains a tedious process.
Meanwhile, the out-of-the-box approach comes with its set of potential consequences, mainly concerning the doubtful regulatory status of cryptocurrencies in general. Institutions typically stay away from such assets, equating them with gambling.
Meanwhile, when it comes to pension funds, one investment attracts more. In other words, if one significantly large pension fund decides to invest in crypto, that will lead to more investments from other funds in the future.
Bitcoin has gone up drastically on the market in the past year, now trading above $58,000 compared to the $3,858-low in 2020. The cryptocurrency is becoming a reliable life raft for savers, mired with lower interest rate returns from fixed-income investments.
Photo by joyce huis on Unsplash
