Wisconsin's Pension Fund Adds Bitcoin to Balance Sheets

Monday, May 20th, 2024 -- 9:00 AM

(Rich Kremer, Wisconsin Public Radio) Wisconsin’s pension fund has added bitcoin to its balance sheets, buying more than $160 million worth of shares in two newly approved funds earlier this year.

According to Rich Kremer with Wisconsin Public Radio, U.S. Securities and Exchange filings from the State of Wisconsin Investment Board show that between Jan. 1 and March 31, it bought just more than $99 million worth of shares in a bitcoin exchange-traded fund, or ETF, from investment juggernaut Blackrock.

The Investment Board, known as SWIB, also bought about $64 million worth of another bitcoin ETF from Grayscale. A spokesperson for SWIB told WPR it doesn’t comment on specific assets or acquisitions.

Marquette University Emeritus Associate Professor of Finance David Krause said there’s a distinction between buying bitcoin itself and buying shares of a bitcoin ETF. People can buy bitcoins directly and store them in a digital wallet, but Krause said to think of the bitcoin ETF’s more like a mutual fund.

He said shares of the ETF are tied to the price of bitcoin but investors don’t actually own the cryptocurrency. Bitcoin ETFs, like the ones bought by SWIB, were approved by the SEC on Jan. 10.

“These are traded on stock exchanges,” Krause said. “So, they have liquidity just like shares of stock. They’re also regulated by the Securities and Exchange Commission. That gives investors some confidence that they’re not dealing with directly buying an asset.”

While $160 million is a lot of money, Krause said it’s a small fraction of Wisconsin’s overall pension fund. At the end of December, SWIB held more than $155 billion in assets, with the vast majority of that representing assets in the Wisconsin Retirement System.

“Like any good portfolio manager, you want to diversify,” Krause said. “And now that bitcoin has been around for well over a decade, we’re aware that not only does it offer pretty strong returns, sometimes over periods of time quite phenomenal returns, but it also has diversification capabilities. It doesn’t move directly, in tandem with stocks and bonds.”

However, bitcoin is notoriously volatile. In 2021, the price of one bitcoin peaked at almost $66,000 before dropping to around $16,000 in 2022. This year, it hit a new high of about $71,000.

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