The Ruffer Investment Co. says it made its 2020 bitcoin allocation to further diversify its portfolio for a post-COVID world.
The UK money manager bought $15 million worth of BTC in November last year. Ruffer is just one of a growing number of traditional financial institutions starting to allocate capital to bitcoin.
The company says it’s expecting further institutionalization and financialization of the cryptocurrency in the future.
Ruffer: “Investment World is Desperate for Safe-Havens”
As BeInCrypto reported, The Ruffer Investment Co. announced the addition of $15 million worth of bitcoin to one of its funds in November 2020. The fund’s parent company, Ruffer, currently has more than $28 billion in assets under management.
In the company’s latest Investment Manager’s Period End Review, Ruffer fully justified the bitcoin allocation. Published on Jan. 18, the document covers the closing six months of 2020.
Ruffer describes its bitcoin buy as being part of a history of “unconventional” portfolio allocations. As the Guernsey-based asset manager puts it:
“This is another example, a small allocation to an idiosyncratic asset class which we think brings something significantly different to the portfolio.”
The company describes how the slashing of interest rates by the Federal Reserve and central banks globally makes holding cash increasingly less appealing. This fuels a hunger among investors for new safe-haven and uncorrelated assets, it wrote.
Noting its 3% allocation as “small but meaningful,” Ruffer also clearly acknowledged the risk of its decision:
“If we are wrong, bitcoin will return to the shadows and we will lose money.”
Preparing for a Post-COVID World
In its Period End Review, Ruffer discussed how investment strategies would need to change in the wake of the coronavirus. It referenced its own approach, consisting of a “protective side” and a “growth side.”
Under its protective assets, Ruffer included credit default swaps, index-linked bonds, gold, and bitcoin. Meanwhile, it will also target equities focused on economic recovery as part of the growth story.
Ruffer added that some investors might feel uneasy about the inclusion of certain assets. However, when considered as part of a wider portfolio, they represent “true diversifiers.”
Early Institutional Bitcoin Buys Already in the Green
In addition to buying bitcoin itself, the Ruffer Investment Co. also bought “proxy equities” in MicroStrategy and Galaxy Digital. After holding the stocks and BTC for less than two months, it reported gains of 100% and 90%, respectively. This doesn’t include price gains after Dec. 31, though.
Other large bitcoin buyers have found themselves in a similar position. For example, the $1.125 billion total BTC holdings of MicroStrategy are now worth more than $2.5 billion at today’s bitcoin price.
The success of early adopters has already encouraged other companies and money managers to add BTC to their portfolios. Ruffer expects this trend to continue:
“We think we are relatively early to this, at the foothills of a long premium trend of institutional adoption and financialisation of bitcoin.”