Australia’s $2.4 Trillion Pension Fund Industry Calls Crypto “Untested” and “Uninvestable”

Australia’s corporate watchdog ASIC Chair meanwhile is working with lawmakers to develop rules for crypto, which he said is “driven by extraordinary consumer and investor demand.”

Australia’s $2.4 trillion pension fund industry is slow to adopt cryptocurrencies as Ross Barry, who oversees A$27 billion ($19.5 billion) as chief investment officer of superannuation fund Spirit Super said that crypto is “too risky to be considered for institutional portfolios.”

This is because of the crypto’s extreme price swings, and as such long-term funds have to watch how the sector develops, Barry said in an interview.

“It’s still volatile and there are still significant governance risks around things like even down to how do you have custody.”

“I don’t think it’s fit for purpose for superannuation funds.”

According to Australian Taxation Office data, just A$212 million is invested in digital assets from a pool of A$822 billion self-managed pension funds, which have a higher likelihood of investment in crypto.

Growing Interest in Crypto

While Australia’s pension funds are yet to get comfortable with crypto, in other parts of the world, they have started to invest relatively small amounts in them. Just last month, the Houston Firefighters' Relief and Retirement Fund bought $25 million worth of Bitcoin and Ether.

“I see this as another tool to manage my risk,” said Fund’s chief investment officer Ajit Singh at the time.

“It has a positive expected return and it manages my risk. It has a low correlation to every other asset class.”

A week ago, Steve Kurz, the global head of asset management at crypto asset manager Galaxy Digital, also said that the $100 trillion industry covering pension funds, endowments, and sovereign-wealth funds “believe in the crypto future” and Web 3.0, but do not know how to start.

According to a Fidelity Investments survey, most of the institutions are interested in crypto and plan to allocate to this new asset class by 2026.

Keeping An Eye On Its Potential

But Paul Schroder, CEO of AustralianSuper, the country’s largest pension fund with A$244 billion under management, said a key problem for crypto is a lack of an income stream.

“We don’t see cryptocurrency as investable for our members,” he said at a conference in Sydney on Monday but added that there is interest in decentralized finance (DeFi).

Meanwhile, Barry at Spirit Super is researching crypto, especially central bank digital currencies (CBDCs).

“It would be remiss of us not to keep a weather eye on the potential for cryptocurrency to become a more relevant part of the global currency system.”

“We’ve just taken the view that it’s just still too untested.”

Unlike pension funds, the country’s biggest bank, Commonwealth Bank of Australia, is all set to allow its 6.5 million shares to buy, sell, and hold crypto because, as per its CEO Matt Comyn, while there are risks in participating, “bigger risks in not participating.”

For Now, Investors Are On Their Own

On Monday, Australia’s corporate watchdog also said that it was working with lawmakers to develop rules for crypto, but until then, investors are “on their own.”

Australian Securities and Investments Commission (ASIC) chair Joe Longo told investors at the Australian Financial Review Conference to use “great caution” when investing in crypto because “at present many crypto-assets are probably not ‘financial products' …. for the most part, for now at least, investors are on their own.”

The regulator said it was working with lawmakers who have proposed a licensing regime for crypto exchanges and to change laws to allow DAOs.

“Crypto is on our doorstep, here and now, and being driven by extraordinary consumer and investor demand. The implications for consumers are potentially huge.”

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