Fund Manager Ruffer Sees Rise of Institutional Bitcoin Adoption and Financialization of Bitcoin

By: Henry Felix

January 21, 2021 10:00 AM

Multibillion-dollar British based investment management firm Ruffer has revealed that its bitcoin holdings now account for about 3% of its entire portfolio.

Ruffer who's portfolio is approximately $29 billion, believes that we are “at the foothills of a long trend of institutional adoption and financialization of bitcoin.”

Ruffer provided an update on the firm’s bitcoin investment this week in its Investment Manager’s Review on Dec. 31. The firm wrote:

We gained our bitcoin exposure via the Ruffer Multi Strategies Fund and two proxy equities in Microstrategy and Galaxy Digital. At the period end, the combined exposure of these was just over 3%.

The firm noted that “In the short period since investing both stocks are up more than 100% and bitcoin is up 90%.”

On its website, Ruffer declared that its assets under management as of Dec. 31 was £21 billion (approximately $29 billion). A 3% allocation would mean the firm’s bitcoin holdings are now worth about £630 million ($861 million).

Ruffer disclosed its bitcoin purchase of £550 million ($750 million) in November, which was initially 2.5% of the firm’s entire portfolio.

“Our rationale has been well-publicized but briefly, we have a history of using unconventional protections in our portfolio. This is another example, a small allocation to an idiosyncratic asset class which we think brings something significantly different to the portfolio,” Ruffer detailed, adding:

Due to zero interest rates the investment world is desperate for new safe-havens and uncorrelated assets. We think we are relatively early to this, at the foothills of a long trend of institutional adoption and financialization of bitcoin.

While acknowledging the risks associated with bitcoin, Ruffer also sees growing signs of its increased adoption, which the firm believes will have a significant impact on the price of the cryptocurrency.

“Think of bitcoin’s bad reputation as a risk premium – as we move through the process of normalization, regulation, and institutionalization, the compression of this premium can have a dramatic effect on the price,” Ruffer noted. “If we are wrong, bitcoin will return to the shadows and we will lose money – this explains why we have kept the position size small but meaningful.”

The chairman explained that his firm has “done much work on assessing the danger” of investing in bitcoin, “watching it for a longish time.” His firm concluded that “it is a unique beast as an emerging store of value, blending some of the benefits of technology and gold,” emphasizing, “Yes, it is a seemingly non-sensical asset – but one that makes absolute sense for how we see the world.”