The Houston Firefighters’ Relief and Retirement Fund, which has around $5.5 billion of assets under management, has invested $25 million into both bitcoin (BTC) and Ethereum’s ether (ETH).
The investment was made through NYDIG, a cryptocurrency-focused subsidiary of asset manager Stone Ridge. According to Bloomberg Ajit Singh, chief investment officer for the fund sees the cryptocurrencies as “another tool to manage my risk,” while noting they have “positive expected return” and a “low correlation to every other asset class.”
Bloomberg’s report, citing the National Association of State Retirement Administrators, points out that state and local government pension funds are a powerful force in the investment world, as they now oversee over $5.5 trillion in assets.
The pension fund’s move comes after the price of bitcoin hit a new all-time high above the $67,000 mark, seemingly over the listing of the first bitcoin futures exchange-traded fund (ETF), which started trading on the New York Stock Exchange earlier this week.
In its debut, the fund, the ProShares Bitcoin Strategy ETF (BITO), became the second-most heavily traded fund on record, and on the second trading day it brought in a trading volume of $1.2 billion. The fund now has assets above $1.1 billion, making it the fastest ETF to hit $1 billion on record.
According to analysts at JPMorgan, however, the ETF wasn’t behind bitcoin’s price surge and instead, a flow of funds out of gold ETFs and into bitcoin-related products could explain the rise. Singh noted that he preferred investing directly in the cryptocurrencies and avoid getting “the synthetic exposure.”
The analyst added that as more institutional investors adopt cryptocurrencies, there will be more dynamics developing surrounding supply and demand. Moreover, he said, having physical assets will in the future give the fund the “possibility of income generation potential.” Singh added:
We have been studying this as an asset class to add to our investment portfolio for quite some time; we were watching it, we were analyzing it. It became an asset class we could not ignore anymore.
The Houston fund reportedly handles the retirement benefits for more than 6,600 active and retired firefighters and family beneficiaries. Active firefighters contribute 9% of their salary to the fund, and the city of Houston contributes at least twice that amount.