With a BS in Economics from Northeastern University and an MBA in Investment Analytics and Corporate Finance, Mathew Bartolini opines that Bitcoin and other cryptocurrencies have no place in investment portfolios.
In Bartolini’s view, “cryptos have no role to play in investment portfolios.” Ironically, Bartolini is a Fund Manager and a Managing Director at State Street Global Advisors. Besides, he doubles up as the Head of SPDR Americas Research.
Fund Managers Consider Crypto
However, it’s likely he may not have interacted with virtual currencies. Consequently, this assumed lack of knowledge or awareness of the role of cryptocurrencies in modern day finance plus a barrage of FUD fuel his skepticism that Bitcoin ,for example, is not the best choice when expanding an investment portfolio. Encouragingly, and in recent times, fund managers and economists have been encouraging the inclusion of Bitcoin and altcoins in investment portfolios.
For example, a veteran Wall Street hedge fund manager, Mark Yusko, said in May that:
“Bitcoin is the best [portfolio] diversifying asset. It has very low correlation and should be in everyone’s portfolio. Bitcoin is a better bet than stocks.”
Towards the end of last year, Yusko invited individuals and firms willing to take a $1 million bet on the performance of Bitcoin over 10 years. Unfortunately, no one was ready to take the other side of the bet.
According to Yusko:
“It is a good thing they did not take it because Bitcoin is up over a hundred percent this year, the S&P is up 14 percent. I think going forward from here, even over the next ten years, it’s not going to be close.”
Although the hedge fund manager seems to be all in, he advises investors to consider Bitcoin, allocating between one and five percent of the total fund in the cryptocurrency. However, younger investors can invest more since they have a “longer investment horizon.”
Yale University Research
Apart from Yusko, a study by Yale University recommended that six percent of every portfolio should comprise of Bitcoin and any other liquid cryptocurrency asset.
The study investigated, among other things:
“Whether the cryptocurrency market behaves similarly to the stock market. Also, whether the returns on the cryptocurrency market are compensated by the risk factors derived from the stock market, the exposure of cryptocurrency returns to major fiat currencies, and the exposure of cryptocurrency may serve as an alternative to precious metals as a store of value.”
As per Aleh Tsyvinski, Bitcoin should be part of an investment portfolio regardless of whether one is interested in crypto or not. For those who are less enthusiastic, Bitcoin should form at least 4 percent of their portfolio while keen investors should have at least 6 percent.
Tsyvinski’s study supported Dragan Boscovic, a professor at Arizona State University, who noted that institutional investors have started paying more attention to crypto as a “valued investment opportunity.”
Investors Sinking Funds to Altcoins
A Twitter poll, to establish how much investors hold altcoins in their portfolios, further support Yale’s research finding. The survey unearthed that 47 percent of investors are holding between 60 and 100 percent of their cryptocurrency investment in altcoins. Additionally, out of more than 10,000 votes, 17 percent indicated that 40 percent to 60 percent of their portfolios are made up of altcoins.
However, as Forbes notes, how much an investor should put into virtual currencies depends on, “one’s tolerance for risk and their familiarity with cryptocurrencies.”