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AMP Super explores use of crypto ETF investments
The super fund is open to the idea of using crypto ETFs to invest in the asset class, but says there are important compliance checks to tick off first.
Development in cryptocurrency regulations and greater recognition of the potential of blockchain technology is gradually increasing interest in crypto assets by larger investors, AMP’s head of portfolio management Stuart Eliot said in a recent panel session.
AMP Super was the first super fund to invest in cryptocurrency, adding bitcoin futures into its dynamic asset allocation program in May last year. The exposure to the asset class has so far generated positive results for the fund.
Speaking at the Australian Wealth Management Summit on Friday, Eliot said that one of the trigger points for AMP Super deciding to allocate a small exposure to this asset class was the approval of crypto ETF products by the Securities and Exchange Commission (SEC) in the US.
“That event gave the asset class institutional legitimacy and that triggered us to conduct research into whether we could build effective trade models for that. That took about three months and we then got all the necessary approvals to go live,” said Eliot.
AMP views cryptocurrency as a positive investment case not just in terms of the increased allocation it’s expected to receive, but in terms of developments in areas such as stablecoins and how that might transform the financial system.
While the super fund currently trades bitcoin futures in order to invest in the asset class, Eliot said AMP Super is “on a path to using an ETF”.
“[However], there’s various things that we need to tick off on the road to get there,” said Eliot.
From an individual, retail investor perspective, Eliot suggested that ETFs are probably one of the more secure and straightforward methods of getting an exposure to the asset class.
“They’re APRA-regulated and if you just wanted to invest in a specific coin such as bitcoin, there’s five or six ETFs you can choose from,” he said.
For investors who want something more sophisticated, Eliot said they would be better off using a more specialised custodian service provider.
Speaking on the same panel, Global X ETFs senior product and investment strategist Marc Jocum agreed that ETFs have played an important role in making crypto investments more accessible as dealing with exchanges directly has deterred many retail investors from gaining exposure to crypto assets.
“A lot of financial advisers consider ETFs synonymous with safety, even though the things that go into ETFs can be volatile, but that really provided the green light for adoption around cryptocurrency because it was quite difficult to get access before,” said Jocum.
Jocum noted that while crypto ETFs in Australia have seen strong growth, hitting over $1 billion, the growth has been even more significant in the US where the crypto ETF market is now above $300 billion in total.
“In Australia, we’ve had around $400 million in flows over the last year [into crypto ETFs], in the US that happens in around a week,” he said.
“So, there’s a lot of adoption happening in crypto, and it’s not just retail investors or advisers buying it. You’ve got sovereign wealth funds buying cryptocurrency in their portfolio as well.”
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