New Zealand retirement fund's Bitcoin investment earns 5 times profit, but harshly criticized by competitors: "This is gambling"

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New Zealand Retirement Fund Invests in Bitcoin

Kiwisaver is a retirement savings scheme implemented in New Zealand, which consists of five categories: Defensive, Conservative, Balanced, Growth, and Aggressive funds. It is operated by government-appointed investment firms. The Kiwisaver Growth Fund managed by New Zealand Wealth Funds Management has allocated 5% of its total assets to invest in Bitcoin.

According to a report, the Kiwisaver Growth Fund deployed 5% of its funds into Bitcoin (in the form of GBTC) in October 2020. As of September 2020, the fund had approximately NZ$1.75 billion in total assets, meaning around US$60 million was allocated for Bitcoin investment. Within just five months, Bitcoin has surged significantly, resulting in over a 5x return for the fund. Despite a recent price decline in Bitcoin over the past week, the fund still holds a considerable unrealized gain.

James Grigor, the Chief Investment Officer of New Zealand Wealth Funds Management, believes that the remarkable similarities between Bitcoin and gold are one of the main reasons for the company's investment in Bitcoin. In an interview with New Zealand media outlet Stuff, he stated:

"If you are comfortable investing in gold, you should not overlook Bitcoin."

James Grigor further mentioned that the price of Bitcoin is expected to continue its upward trend, with more KiwiSaver funds adopting Bitcoin in the next five years. However, the asset management company also emphasized that should the upward momentum stall, they will promptly reallocate funds to other asset classes.

Skeptical Competitors

However, other asset management companies operating Kiwisaver do not seem to agree with the strategy of New Zealand Wealth Funds Management. David Beattie from Booster, another asset management company, stated:

"At this stage, we would not do it because the risk-return characteristics of that investment are something we can't manage and accept. From our perspective, it's too speculative."

Sam Stubbs, the CEO of Simplicity, believes that including Bitcoin in KiwiSaver investment portfolios is more of a gamble than an investment, expressing surprise at fund managers considering Bitcoin a legitimate asset class. Others in the investment industry have criticized Bitcoin, stating that its value storage is overestimated, prices are unstable, lacks practical use cases, and does not align with green investment principles.