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Pensioners in Wisconsin now have exposure to Bitcoin following the state pension fund’s decision to allocate approximately 0.1% of its $156 billion portfolio to spot Bitcoin ETFs.
According to a Form 13-F filing with the SEC, the State of Wisconsin Investment Board has invested around $160 million in BlackRock’s iShares Bitcoin Trust and Grayscale’s Bitcoin Trust.
The allocation of even a small percentage of a fund of this size and stability to Bitcoin indicates the asset’s growing maturity and acceptance as a legitimate investment.
Wisconsin’s State Pension Fund is one of the most financially robust in the United States. The 2023 State of Pensions report by the pension analysis firm Equable ranks Wisconsin fifth in funded ratio, at 100.2%. This places Wisconsin well above the national average of 78%, demonstrating significant solvency compared to other similar funds.
The Wisconsin Pension Fund’s Bitcoin Move: A Strategic Trial for Diversification
The Wisconsin Retired Educators Association hails it as a “great success,” with the fund ranking as the 25th largest globally and the ninth largest in the United States.
In a May 31 interview with PBS, Marquette University Associate Professor Emeritus of Finance David Krause remarked, “This is just an entry point, and I believe they’re testing the public’s reaction. It’s a trial run that won’t significantly impact the portfolio but will add diversification until it potentially reaches a 1% or even 2% allocation.”
First of Its Kind: Wisconsin’s State Pension Fund Ventures into Cryptocurrencies
Wisconsin’s State Pension Fund is among the pioneers in adding cryptocurrencies or their derivatives to its balance sheet.
Last year, Korea’s National Pension Service, the third-largest pension fund globally, invested $20 million in Coinbase shares. Additionally, Japan’s government pension fund, the world’s largest with $1.69 trillion in assets under management, was reported to be exploring “illiquidity assets” like Bitcoin.
In the past, two Canadian funds ventured into digital assets with significant setbacks. The Ontario Teachers’ Pension Plan invested $75 million in FTX in November 2022, while Caisse de Dépôt et Placement du Québec allocated $130 million to Celsius in October 2021.
Fairfax County in Virginia also revealed an investment in cryptocurrencies through the private digital asset manager Morgan Creek Capital. Jeff Weiler, the executive director of Fairfax County Retirement Systems, stated that the fund allocated 0.3% of its $3 billion in assets to Morgan Creek. The Police Officers Retirement System similarly allocated 0.8%, or $11 million, to digital assets.
Despite these precedents, the Wisconsin State Pension Fund appears to be the first and largest of its kind to add a direct Bitcoin derivative to its assets under management.
Hedge Against Government Influence
Krause believes that Bitcoin offers significant upside potential for the fund while mitigating downside risks due to its 21 million supply cap. “Not many people discuss how Bitcoin has the potential to reduce volatility stemming from government actions,” he noted.
Could Wisconsin’s State Pension Fund be the first of many to follow this trend? Krause thinks so, but with a stipulation.
“This strategy is suited for well-funded pension funds,” he explained, emphasizing that the decision to invest in Bitcoin ETFs is a long-term strategy. According to the finance Ph.D., Wisconsin has the financial resilience to weather Bitcoin’s typical boom-and-bust cycles, though he sees the overall trend as moving “upwards.”
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