Regulators are loosening the rules on crypto. Are asset owners interested?
Moves in the US are afoot to make it easier for pensions to invest in crypto - with Harvard’s endowment a prominent asset owner to do so. But is a similar trend in play on this side of the Atlantic? (Reuters/Dado Ruvic)
If you’re an asset owner who values financially-lucrative investments then chances are you have weighed the benefits – and drawbacks – of crypto.
Why wouldn’t you? After all, with great risk also comes great opportunity and if there’s one thing we know about crypto, it’s an extremely risky asset with the potential to either burn or make an investor’s returns.
Earlier this year Donald Trump passed an executive order enabling 401k savings plans to invest in a range of alternative assets, including digital currencies. More recently, the UK lifted a ban on retail investing in crypto ETFs.
Crypto optimists such as Sam Roberts, director of investment consulting at Cartwright, argue events like these indicate we are becoming “more curious and open” towards this fickle asset.
So is the excitement around crypto reflected in the allocations of institutional investors, both at home and abroad in the US?
An increasing number of bitcoin allocations
Last month AOX’s sister publication, MandateWire, reported that US university endowment funds had begun cautiously investing in bitcoin, one of the less volatile cryptocurrencies, through ETFs.
Harvard Management Company, which oversees the $53.2bn Harvard University Endowment, made a $116mn investment in BlackRock's iShares Bitcoin ETF. Brown University’s $7.2bn endowment invests in the same ETF, albeit on a smaller scale, having allocated $13mn to bitcoin as at June 2025.
It is understood that the Universities Superannuation Scheme in the UK is not considering investing in crypto at the moment.
According to Roberts, while the UK government’s decision to lift a ban on investing in cryptocurrency ETFs was hardly an “open arms to the industry”, it definitely makes it easier for bitcoin allocations “to grow and flourish”.
For Roberts, who spearheaded a 3 per cent allocation to bitcoin from an unnamed UK pension fund last year, this is a step in the right direction.
Reluctance persists
So, has the attitude towards riding the crypto wave begun to shift? Well, not exactly.
Among pension funds, caution continues to prevail. Amin Rajan, economics commentator and chief executive of Create-Research, told AOX that UK private and public sector pensions were in a de-risking mode: “Higher rates have reduced the discounted values of their liabilities and rising markets have boosted the asset values. Hence interest in risky assets is hugely diminished while they prepare for a buyout or self-sufficiency.”
In the US, the attitude is much the same. Despite the recent lifting of several key guardrails for 401ks, Rajan argued private sector plans are in a similar position.
In fact, it is only the public sector plans with funding levels well below 100 that are chasing risky assets.
Regarding why universities such as Harvard and Brown are opting to invest in bitcoin, Rajan said both endowment funds “believe crypto currencies are here to stay due to tailwinds from the favourable stance of the Trump administration”.
However, there are undoubtedly dangers within this sector that the agile investor would do well to avoid. As most readers are aware, when you invest in shares, bonds and other asset classes, analysts can attribute estimated value based on the underlying fundamentals of the business.
This is not the case for cryptocurrencies. These are sentiment-led, meaning buyers are forced to rely on another investor buying the same asset at a higher price in the future.
“The vast majority see bitcoin as a house of cards in which professional traders have relied on the usual ‘pump and dump’ to drive up the price and bring in new punters before cashing out,” said Rajan. He went on to note that, thus far, bitcoin does not fulfil the three key functions of money: medium of exchange, unit of account and store of value.
Nor does he believe central banks will ever allow that to happen, although crypto-enthusiast Roberts disagreed: “Do we have to ask central banks’ permission for everything? I don't think people do,” he argued.
James Brundrett, a senior investment consultant at Mercer, suggested that while there was a question mark surrounding the “future viability of certain cryptocurrencies”, crypto could potentially play a role in hedge fund portfolios.
He added: “As this technology develops and all institutions get involved in the crypto market, it could become more viable… but you’ve got to proceed with some element of caution.”
Caution indeed. At present, Hargreaves Lansdown doesn’t offer a crypto ETF, and according to Brundrett, while cryptocurrencies may be able to find their way into the defined contribution space, this would usually be through a multi-asset manager that decided to have some small exposure.
As one would hope, this matches the line being taken by Pensions UK. Its deputy director of policy, Joe Dabrowski, described crypto as “relatively nascent and untested”. He also emphasised the steep rises and declines in non-fungible tokens and meme coins, as well as the sector’s propensity for high-profile scandals.
“Pension funds are required by law to act prudently and in the best interests of their beneficiaries, so they must tread carefully and not speculate with members’ retirement savings,” Dabrowski added.
Regardless of whether attitudes end up changing or not, it won’t occur overnight – something even Roberts had to concede: “We’d love more pension schemes to invest if it’s right for them, but we can’t expect it to happen just like that.”