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The Wisconsin pension fund ranked as one of the most fiscally sound in the nation took bold action this year
It invested in Bitcoin most all government workers are part of the employee trust fund that pays out retirement benefits
But for a pension fund widely known for being stable prudent and smart with investments
Is this a departure or write-on brand our next guest says it's certainly turning heads
We should know PBS Wisconsin employees are
Participants in the Wisconsin retirement system. We are joined by David Krauss market University emeritus associate professor of finance
And thanks very much for being here. Thank you. So what is the reaction within the kind of investment industry to this news?
Investment industry is pretty amazed that a pension fund this early in the introduction of the Bitcoin ETF
Came on board. They expect that it might take a several years before there would be institutional
involvement with Bitcoin investing so
Bitcoin ETF is different and apart from the kind of
Bitcoins that folks might have in their digital wallets. Yeah, that's right
It was January of this year that the spot
Bitcoin ETF was approved by the SEC
That allowed
Investors like the university
Systems or SWIB in this case the Wisconsin investment board to buy
Directly these securities that are regulated by the SEC highly liquid and traded on exchanges
Still was it a surprise to you to see that it was
But Wisconsin's
Investment board has always been innovative
This is a fully funded pension fund. So in a way
They have the luxury of being able to invest for the long term
They don't need to worry as much about liquidity is say the pension fund for the state of Illinois
Which is only funded at 50%
Of its level. So should it cause pensioners though or workers to worry given the volatility of Bitcoin?
A lot of assets are volatile. I mean if you really were to look deep down into the portfolio
You would see that a lot of assets including some stocks as well as some other alternative investments
Are quite volatile in nature. Yeah, Bitcoin has moved around a lot
But supply and demand are starting to balance out and I do think the investment community is beginning to understand this more as a viable
Alternative investment. So how much are they putting into Bitcoin compared to the fund itself compared to the fund itself?
It's it's just a toe in the water. It's one-tenth of one percent now a hundred and eighty million dollars is not
Pocket change, but this is a hundred and eighty billion dollar fund. I think it's just an entry point
I think they're testing to see the reaction of the public to
whether or not there's resistance to owning this and they're using it as a trial run because it really is not going to impact the
Portfolio
Substantially until you get to maybe a one or two percent positioning because I was going to ask you
What does your expertise tell you about whether this is a good investment for the pension fund?
Well, it's it's a good investment in the sense that it's going to add
diversification
the objective of
Portfolio
Manager or fund is to maximize return while minimizing risk
Bitcoin like other alternative investments does not move in parallel with stocks and bonds. So their board adds nice diversification effect
the potential upside returns are high like as it could be with any new technology and
finally because this is a
currency
With a limited supply it actually can serve as an inflation hedge
I don't think very many people talk about the potential for it to
remove volatility of
government actions
Do you expect other states to follow suit watch this closely and follow? Oh, I do I do now
I don't expect those that are underfunded
Can afford to do that because this is a long play. I mean the state of Wisconsin can afford to go through
Maybe several cycles. I think the long-term trend of this type of assets is going to be upward slope
But there's going to be dips. There's going to be peaks
But if you're a pension fund with low liquidity, you really can't afford long place
Do you feel like Wisconsin's investment and Bitcoin legitimizes it?
It does the day that it was announced and that's when the SEC 13F form
Became available to the public that day Bitcoin went up 1%
Now is it solely attributable to the fact that an institutional investor bought those?
I
Think so. So I think the market did pay attention to that and I would not be surprised to see other institutional investors
Move into this asset category. Hmm David Crouse. Thanks very much. Good. Thank you
You
Here we am
Which is another very legitimate even has more functionality than Bitcoin Bitcoin is just really
going to just become a digital currency and we don't appreciate it as much here in the states because
We don't think our money is going to be taken from us by our government and we don't worry about
inflation rates going up to 200%
If you're in China, if you're in Brazil, if you're in Argentina
If you're in Venezuela
Other areas where you're worried about the government
Obsconding with your funds or just completely deluding away the value of your currency
People are holding Bitcoin because
It removes that element of risk
So it's gonna
Ethereum is actually even better. It has more functionality Bitcoin is really just a
peer-to-peer version of Venmo
Okay
Whereas this Ethereum
Has the ability to actually program within there and I don't want to get too far out on a limb, but it
that
When that becomes available and it was just approved
We don't know the date that it can begin trading, but it was just approved this week
Um, there's gonna be a real pop there in the state of Wisconsin. We'll be investing in that
Well, it makes it makes
Private investors think yeah, well if they're doing it, it must be good
You know, I was selling Tommy
I looked at my notes. I was at an investment conference with my students in 2016 down in Chicago
And we would get to hear the leading hedge fund analysts
Make their one best pitch of the year
And it was a fundraiser for charity and people would pay like five thousand dollars to attend
But I got to bring down students for free, which was great and this young analyst was pitching the video
Which was a $12 stock at the time
It's a $1,200 stock now at the time and it's the fourth largest company in the United States
And what do they do they make the semiconductor chips that AI is powered on
And this guy was talking about artificial intelligence and machine learning
And he was saying this company is makes the chips
Think of this as railroads 150 years ago. They're making the rails. They're making the track
Did your people listen?
Um, we couldn't at the time because we had certain investment limitations that my students what they could invest in and not invest in
But see now no one would hesitate to invest in an AI stock
And 10 years ago that would be as crazy as bitcoin sounds right now
Yeah, this
You know anybody under 40 is very comfortable using digital
Currency venmo and things of that nature. This is going to become very standard
Practice for how money is moved around the world 10 years from now. Well, I heard it here first. Well, thank you
All right. Okay. You think that went well? Yeah, okay
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