Market Insight invests 47 trillion won in Bitcoin by the Faculty and Staff Mutual Aid Association

Market Insight October 25th at 4:11pm

The Korean Teachers’ Credit Union has decided to invest in Bitcoin, a cryptocurrency. It is the first case of a decision to invest in cryptocurrency among domestic pension funds. Analysts say that as cryptocurrency-related products have been released one after another in the global financial market and have been incorporated into mainstream assets, there are signs of change even among pension funds, which have made conservative investments centered on traditional products.

Faculty Mutual Aid Center in Yeouido, Seoul / Photo = Yonhap News

According to the asset management industry on the 25th, the Teachers’ Mutual Aid Association is pursuing a plan to invest in bitcoin-related exchange-traded funds (ETFs). It plans to invest first in spot ETFs that are linked to the Bitcoin price. It is known that when a domestic asset management company makes a bitcoin-related ETF product and lists it overseas, the Faculty and Staff Mutual Aid Association buys it. The specific investment scale is determined through the Investment Review Committee.

Bitcoin-related ETFs have recently been launched one after another in North American financial markets such as the United States and Canada. The ‘Proshare Bitcoin Strategy ETF’ based on bitcoin futures listed on the New York Stock Exchange on the 19th sold $980 million (about 1.15 trillion won) on the first day of listing, and in 2004, SPDR Gold, a gold-related ETF It recorded the second highest trading volume after SHARE. On the 15th, Mirae Asset Asset Management, a domestic management company, also listed the ‘Betapro Inverse Bitcoin ETF’ on the Toronto Stock Exchange, Canada, which bets on the decline in the price of bitcoin.

The Faculty and Staff Mutual Aid Association manages the funds paid by faculty and staff during their tenure. As of the end of last year, it was rolling out 47 trillion won.

Domestic institutions break ‘cryptocurrency investment taboo’

The Faculty and Staff Mutual Aid Association decided to invest in bitcoin for the first time among domestic pension funds following the judgment that cryptocurrency is gradually becoming a mainstream investment asset. In particular, as exchange-traded funds (ETFs) related to bitcoin appeared one after another, the price of bitcoin changed to a transparent and supervisable product, which is also analyzed as a factor that made the investment decision.

○ Overseas pension funds have already been invested

Overseas pension funds have already started investing in cryptocurrencies and related companies. The California Civil Service Pension Service (Calpers) of the United States bought 113,000 shares of Bitcoin mining company Riot Blockchain in 2017. The US Fairfax County Police Retirement Pension Service started investing by purchasing a 0.5% stake in a blockchain company in 2018, and then increased its portfolio to 7% of its assets under management. Singapore’s sovereign wealth fund Temasek holds a stake in Binance, the world’s largest cryptocurrency exchange, through its venture capital, VC Vertex.

In the meantime, there have been many cases of investing in related technologies such as block chains, non-fungible tokens (NFTs), and stock exchanges rather than buying bitcoins, but recently, just like the Houston Firefighters Retirement Pension (HERRF) in the United States, there have been many direct purchases of bitcoin and ethereum. also appeared in pension funds. Ajit Singh, HERRF chief financial officer (CIO) said, “Cryptocurrency is no longer an asset that cannot be ignored.”

An official from the cryptocurrency industry said, “Many institutional investors have been interested in cryptocurrency, but they have been reluctant to invest directly due to concerns about the opacity of Bitcoin’s pricing, the reliability limit of private exchanges, and the risk of hacking. As the market opened, this burden gradually disappeared.”

○ It is likely to affect other domestic pension funds

Domestic pension funds have considered direct and indirect investment in cryptocurrency as a kind of ‘taboo’. Earlier this year, a large domestic asset management company tried to launch a stock-type fund that bundled cryptocurrency-related stocks, but ended up closing it. The company envisioned a product containing stocks of domestic and foreign listed companies engaged in cryptocurrency mining, settlement, and investment. However, in May, the launch was postponed indefinitely when the negative current from the financial authorities became strong, such as when Eun Seong-soo, then chairman of the Financial Services Commission, described cryptocurrency investment as “the wrong way”.

Under this circumstance, the actions of the Teachers’ Mutual Aid Association, one of the major pension funds, are expected to have a significant impact not only on pension funds but also on the domestic asset management industry. An official from a pension fund said, “Pension funds with a strong public character had no choice but to react slowly to the cryptocurrency craze. .

However, the fact that it is difficult to launch a Bitcoin spot ETF in the US market is considered a variable. “The reason why the US Securities and Exchange Commission (SEC) approved the futures ETF is because Bitcoin futures are listed on the Chicago Mercantile Exchange (CME), which is regulated by the authorities,” a financial industry official said. It may take some time to get SEC approval because it is bought and sold on the exchange.”

By Kim Jae-hoo / Kim Jong-woo / Lim Hyeon-woo, staff reporter [email protected]

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