Pensioners in Wisconsin are now indirectly invested in Bitcoin following the state’s pension fund’s allocation of approximately 0.1% of its $156 billion portfolio to spot Bitcoin ETFs.
The State of Wisconsin Investment Board committed around $160 million to Blackrock’s iShares Bitcoin Trust and Grayscale’s Bitcoin Trust, as revealed in a Form 13-F submission to the SEC.
This move, even with a modest allocation, underscores Bitcoin’s growing acceptance and legitimacy as an investment, particularly from a fund of such size and stability.
Wisconsin’s State Pension Fund stands out as one of the most robust in the United States. The State of Pensions 2023 report by pension analyst firm Equable places Wisconsin 5th in the funded ratio, with a remarkable 100.2%. This positions Wisconsin well above the national average of 78%, highlighting its strong solvency compared to other similar funds.
Significant Achievement
The Wisconsin Retired Educators Association hails this as a “significant achievement,” noting the fund’s rank as the 25th largest globally and ninth within the United States.
“This represents an initial step, likely aimed at gauging public response,” remarked David Krause, Marquette University Associate Professor Emeritus of Finance, in a PBS interview on May 31. “This trial phase is unlikely to drastically alter the portfolio but will contribute to diversification until it potentially grows to a 1% or even 2% allocation.”
Pioneering Move
Wisconsin’s State Pension Fund is among the first to incorporate cryptocurrencies or their derivatives into its portfolio.
In the previous year, Korea’s National Pension Service, the world’s third-largest pension fund, acquired $20 million in Coinbase shares. Additionally, Japan’s government pension fund, the largest globally with $1.69 trillion in assets under management, was reported to be considering investments in “illiquidity assets” such as Bitcoin.
Two Canadian funds had earlier ventured into digital assets, albeit with severe repercussions. The Ontario Teachers’ Pension Plan invested $75 million in FTX in November 2022, and the Canadian pension fund manager Caisse de Dépôt et Placement du Québec allocated $130 million to Celsius in October 2021.
Fairfax County in Virginia also revealed an investment in cryptocurrencies via the privately managed digital asset firm Morgan Creek Capital.
Jeff Weiler, executive director of Fairfax County Retirement Systems, noted that the fund allocated 0.3% of its $3 billion assets through Morgan Creek, while the Police Officer’s Retirement System invested 0.8%, or $11 million, in digital assets.
Nevertheless, the Wisconsin State Pension Fund stands out as the first and largest to add a direct Bitcoin derivative to its assets under management.
Hedge Against Government Influence
Krause noted that Bitcoin offers significant upside potential for the fund while mitigating downside risk due to its capped supply of 21 million coins. “Few discuss how [Bitcoin] can potentially reduce volatility stemming from government actions,” he remarked.
Could Wisconsin’s State Pension Fund be the pioneer of a broader trend? Krause believes so, but he issued a caution.
“This strategy is suitable only for well-funded pension funds,” he explained, highlighting that exposure to Bitcoin ETFs is a long-term investment. With a Ph.D. in finance, Krause emphasized that Wisconsin is well-positioned to endure Bitcoin’s typical boom-bust cycles, though he believes the long-term trend is on an “upward trajectory.”
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