Portfolio manager explains why pension funds in Canada aren't in a hurry to make any quick moves in bitcoin ahead of Trump's crypto summit
Bitcoin may have fallen sharply in the past few weeks, but investor sentiment and a supportive Trump administration have buoyed the core cryptocurrency since November. In light of this longer-term upswing are pension funds and institutional investors finally taking crypto more seriously?
One portfolio manager isn’t convinced that Canadian pension funds are ready to dive in just yet.
“The Canadian pension funds so far appear to be still moving quite cautiously,” highlighted Christine Tan, portfolio manager at SLGI Asset Management. “There isn’t a lot of participation in crypto directly,” she said.
Tan pointed to Caisse de dépôt et placement du Québec (CDPQ) who pulled their crypto investments after crypto lender Celsius Network went bankrupt in 2022.
The Ontario Teachers’ Pension Plan (OTTP) also had a stake in disgraced crypto-exchange company FTX in 2022 but also withdrew their crypto investments by year’s end. Tan believes these were exceptions rather than signs of broader adoption.
Over the last week, bitcoin dipped 12 per cent to trade below $80 thousand, partly driven by economic fears around President Donald Trump’s tariff threats.
As of early Thursday morning, bitcoin skyrocketed back up to $90 thousand ahead of Trump’s crypto summit at the White House on Friday.
Despite pension funds withdrawing crypto allocations, there is institutional interest, even if it's limited.
“Some institutional investors take anywhere from one to five percent,” said Tan. “Usually it’s a lower single-digit allocation to crypto with the view that maybe it's a diversifier because it certainly doesn't behave like any other asset class,” she said.
Tan emphasized the rationale behind this could be because bitcoin acts as a potential hedge against inflation and fiat currency devaluation.
“It’s like that digital gold argument,” she added, pointing to bitcoin’s fixed supply of 21 million coins. “It now takes a lot of mining before you get an incremental bitcoin.”
Despite bitcoin’s surge and popularity in the US, SLGI Asset Management has yet to make a move.
“We currently do not have an allocation to bitcoin in our solutions,” she said. However, every year, they reconsider it as part of their asset allocation modelling.
So why isn’t it included in portfolios just yet? Tan explained the volatility remains an obstacle.
“When we do the strategic asset allocation modelling, the relationship is still not stable,” she said. “There are periods of time when bitcoin rallies because the US dollar weakens. There are times when it rallies alongside the US dollar.”
“Even though you could argue it's a diversifier because it doesn't have all of the same drivers as asset classes, it's still not quite stable,” she added.
This unpredictability makes it difficult to justify adding bitcoin to pension fund portfolios, even as regulatory oversight improves, she added.
While cryptocurrency and bitcoin can be used interchangeably, she explained that bitcoin is the one that often attracts attention or scrutiny from institutional investors “because it behaves the most like a typical financial asset,” she said, emphasizing that many other cryptocurrencies remain lightly regulated and regulatory uncertainty remains a sticking point for pension funds.
“Even as recent as five years ago, there wasn't really a framework around it,” she noted. “Of course, what we've seen since then is there have been a lot more eyes around it with the view of trying to even just lay out the disclosure rules.”
Despite their hesitancy, pension funds aren’t ignoring crypto altogether. Some are taking indirect exposure by investing in companies that operate in the crypto ecosystem rather than holding bitcoin itself.
“Traditional pension funds might be looking more at companies that are in the ecosystem as opposed to outright currency, some might also look at the outright currencies,” Tan reinforced.
Consequently, some funds may invest in financial firms that benefit from increased crypto trading activity. As for the funds that do take direct exposure, ETFs are the preferred vehicle, she added.
“It seems to be the most liquid way,” Tan said, noting that the availability of Bitcoin ETFs has made institutional involvement easier. “Five years ago, you didn’t really have the same ability to do that so that financialization of crypto, particularly bitcoin, has certainly helped.”
Even with these developments, institutional allocations to crypto remain modest, Tan re-emphasized, noting the percentage from industry sources sits around 1 to 5 per cent.
“That seems to be where the comfort level is for institutional investors,” said Tan, underscoring her earlier point.
That number hasn’t and likely won’t change much, despite bitcoin’s recent rally and the increasing regulatory framework around it.
“The regulatory piece is already happening,” she acknowledged. “With the proliferation of ETFs, I think it’s fair to say that now you can easily own bitcoin, at least without having a digital wallet.” she added.
While these developments are making crypto more accessible to institutions, the broader question is whether bitcoin’s role in portfolios will stabilize enough to warrant greater allocations.
“What we’re looking for is the volatility to become a little more stable, and maybe on the flip side for the relationship of cryptocurrency and other asset classes to stabilize a little bit,” she said. “Is it more of a risk hedge? Is it more of a risk seeking asset class? Remember, even in the last three years, bitcoin has behaved as both in different periods of time.”
Ultimately, Tan doesn’t believe pension funds will wait for all uncertainties to be resolved before dipping in further. Rather, she expects institutional investors to gradually increase exposure as volatility settles and crypto’s role in portfolio construction becomes clearer.
“Slowly, you're seeing a lot of the grey areas where you need more clarity around it and they’re gradually being addressed,” she said. “That's how [crypto] will evolve.”
