Wisconsin’s Pension Fund Buys $160M Worth of Bitcoin in Trailblazing Move

Pensioners in Wisconsin are now exposed to Bitcoin, after the state’s pension fund allocated roughly 0.1% of its $156 billion portfolio to spot Bitcoin ETFs.

The State of Wisconsin Investment Board invested roughly $160 million in Blackrock’s iShares Bitcoin Trust and Grayscale’s Bitcoin Trust, according to a Form 13-F filing to the SEC.

Having a fund of its size and solvency allocate even a small percentage of its assets under management to Bitcoin signals the asset is maturing and seen as a legitimate investment.

Wisconsin’s State Pension Fund is one of the most financially sound funds in the U.S. According to the State of Pensions 2023 report conducted by pension analyst firm Equable, Wisconsin ranks 5 in funded ratio, at 100.2%. The figure leaves Wisconsin comfortably ahead of the nation-wide average at 78%, signaling significant solvency among similar funds of its kind.

"Great Success"

It’s considered a “great success” by the Wisconsin Retired Educators Association, ranking 25 largest in the world, and ninth in the country.

“This is just an entry point and I think they’re [the fund] testing the public’s reaction,” said Marquette University Associate Professor of Emeritus Finance David Krause in a May 31 PBS interview. “It’s a trial run that’s not really going to impact the portfolio substantially, but rather add diversification until it reaches a 1 or even 2% allocation.”

First of its Kind

Wisconsin’s State Pension Fund is one of the first to add cryptocurrencies or its derivatives to its balance sheet.

Last year, the third largest pension fund in the world, Korea’s National Pension Service, purchased $20 million in Coinbase shares, and it was reported that Japan’s government pension fund–the largest in the world with $1.69 trillion in assets under management–was exploring “illiquidity assets” like Bitcoin.

Previously, two Canadian funds had diversified into digital assets, although those investments came with devastating consequences. The Ontario Teachers’ Pension Plan invested $75 million in FTX in November, 2022, and Canadian pension fund manager Caisse de Dépôt et Placement du Québec allocated $130 million in Celsius in October, 2021.

Fairfax County in Virginia also disclosed an investment in cryptocurrencies through the privately-run digital asset manager Morgan Creek Capital.

According to Jeff Weiler, the executive director of Fairfax County Retirement Systems, the fund allocated 0.3% of its fund’s $3 billion in assets through Morgan Creek, as did the Police Officer’s Retirement System, which deployed 0.8% or $11 million to digital asset exposure.

However, the Wisconsin State Pension Fund appears the first and largest of its kind to add a direct derivative of Bitcoin to its AUM.

Hedge Against Government

Krause reckoned that the asset showcases potential upside for the fund, while minimizing its downside thanks to the 21 million supply limit. “I don’t think many people talk about how [Bitcoin] has the potential to remove volatility due to government actions,” he added.

Is Wisconsin’s State Pension Fund the first of many? Krause thinks so, but he added a caveat.

“This is only for well-funded pension funds,” he said, explaining that the move to offer exposure to Bitcoin ETFs is a long term play. According to the Ph.D. in finance, Wisconsin can afford to go through the typical boom-bust cycles in Bitcoin’s price, but clarified that he sees the trend on an “upwards slope.”