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Pension funds are dipping their toes into buying bitcoin, in a sign that even conventional financial corners are finding it hard to ignore the potential outsized returns from cryptocurrencies.

Pension schemes for the states of Wisconsin and Michigan are among the top holders of US stock market funds dedicated to cryptowhile some pension fund managers in the UK and Australia have also made small allocations in recent months to bitcoin using funds or derivatives.

Advisers say that the surge in bitcoin last year, which more than doubled to touch $100,000, has sparked the interest of conservative trustees.

Crypto analysts predict that it could double again this year when a pro-crypto Trump administration. The president-elect has vowed to make the US “the world’s bitcoin superpower” and end a regulatory crackdown on the sector.

Matt Scott, a consultant at Mercer, which advises UK pension funds, said: “Since election day we’ve been getting a lot of questions – trustees don’t like to think there’s a hot class. of the asset there that they don’t want to know anything about.”

Most pension funds have turned to regulated US exchange traded funds approved last year, which invest directly in crypto for investors and track the price of tokens such as bitcoin and ethereum.

The State of Wisconsin Investment Board was the 12th largest shareholder in BlackRock’s bitcoin ETF at the end of September, according to its latest filings, a holding now worth about $155mn after the fund jumped by 50 percent since the beginning of the quarter. .

Michigan is the sixth-largest shareholder in Grayscale’s ethereum ETF and its stake is worth $12.9mn, based on a November regulatory filing. It’s also the 11th largest holder of the ARK 21Shares Bitcoin ETF, run by investor Cathie Wood, and it’s up 14 percent since the election.

The shift of pension funds back to crypto follows some notable setbacks in the crypto market crisis two years ago. Canada’s Ontario Teachers’ Pension Plan has written off a $95m investment in failed digital currency exchange FTX when it collapses in 2022. Caisse de dépôt et placement du Québec, Canada’s second-largest pension fund manager, agreed it went into crypto “soon” when it wrote a $150mn investment in crypto lending platform Celsius Network.

“There is no doubt that the wind in the head will disappear . . . I think you will see more of this institutional adoption,” said Alex Pollak, head of UK and Israel at 21Shares, a product provider traded on the Swiss cryptocurrency exchange.

In the UK, pension consultancy Cartwright said it had advised its first bitcoin deal, with a small undisclosed £50mn pension scheme allocating around £1.5mn directly to bitcoin rather than through an ETF, in hopes that the outsize return will help plug its funding. deficit.

Sam Roberts, director of investment consulting at Cartwright, said that while the pension industry is “slow moving” he expects this year to be “very interesting” in terms of schemes that decide to allocate more to crypto.

He said more than 50 individual savers approached the consultancy saying they were unhappy with their pension provider and wanted their entire fund transferred to crypto.

Cartwright is in talks with two multiemployer pension funds about setting up a bitcoin fund for investors to choose from, so the funds don’t lose members looking for crypto exposure.

“They saw that many members moved to them . . . there would be a definite first-mover advantage,” said Roberts, who added that discussions are still in the early stages.

Australia’s AMP, which manages pension funds, also uses bitcoin to juice returns.

“This year AMP portfolios took the plunge and made a moderate allocation to bitcoin futures,” said Steve Flegg, a senior portfolio manager at AMP. “We generally think that although crypto is risky, new and not yet fully proven, that it has become too big, and its potential is too great to continue to ignore.”

However, funds allocated to bitcoin and other cryptocurrencies remain a minority in the pension industry, with consultants generally reluctant to recommend exposure to their clients.

In December, the US Government Accountability Office warned that crypto assets have “exceptionally high volatility” after it identified 69 crypto asset investment options available to investors in retirement plans.

“We don’t think pension funds should be allocated to crypto – it’s too volatile and we don’t see any strong valuation framework that can justify the value,” said Daniel Peters, a global investment partner. practice at Aon, who added that better. The way for pension funds to gain exposure is through hedge funds with expertise and asset class expertise.

“We fundamentally don’t think it should be part of a pension fund strategy for reasons unless it’s allocated through a specialist manager,” he said.