LONDON (Reuters) - British fund manager Ruffer Investment Management last month made a bet on bitcoin now worth around 550 million pounds ($745 million), a spokesman for the company told Reuters, in one of the largest signals of rising institutional interest in the digital currency this year.
The allocation by Ruffer, which managed 20.3 billion pounds ($27.3 billion) in assets at end-November on behalf of more than 6,500 investors globally, “acts as a hedge to some of the risks that we see in a fragile monetary system and distorted financial markets,” the spokesman said via email.
The allocation was made through a third-party manager, and represents around 2.7% of Ruffer’s total assets, he added.
Bitcoin has soared by 170% this year as investors see in the cryptocurrency a hedge against the risk of inflation as governments and central banks turn on the stimulus taps, and a digital payment method that promises to go mainstream.
Bitcoin smashed through $20,000 for the first time on Wednesday, jumping 4.5% to $20,440.
That makes bitcoin an attractive bet for investors willing to take riskier positions as they hunt for yield in a record-low interest rate environment.
“We see this as a small but potent insurance policy against the continuing devaluation of the world’s major currencies,” Ruffer said in a memo seen by Reuters.
Cryptocurrencies emerged more than a decade ago but quickly became associated with online crime, trading glitches, hacks and wild price swings. It is only in the last few years that they have started attracting more mainstream interest.
Better market infrastructure has made the nascent asset class more accessible for institutional investors, with hedge fund managers such as Paul Tudor Jones and Stanley Druckenmiller saying they include bitcoin in their broad investment strategies.
Such services range from custody provided by Fidelity Investments and Japan’s Nomura Holdings, to upcoming cryptocurrency indexes by S&P Dow Jones Indices and dealing by SBI Financial Services.
Massachusetts Mutual Life Insurance Company last week became one of the biggest traditional investors yet to seek exposure to bitcoin, buying $100 million worth here of the cryptocurrency for its general investment account, which totalled almost $235 billion in September.
Still, bitcoin remains highly volatile and less regulated than traditional assets, which could steer away more risk averse investors.
J.P. Morgan analysts said last week that bitcoin adoption by more traditional investors like insurance companies and pension funds was subject to restrictions on risk, so their allocations are unlikely to ever reach high levels.
Reporting by Sinead Cruise, Tom Wilson, Anna Irrera, editing by Louise Heavens, Kirsten Donovan
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