A chief investment officer at UBS Global Wealth Management says he would hold “at least 10%” of his assets in cryptocurrency if not for his role at the private bank, which restricts him from investing in the volatile digital asset.
Kelvin Tay, regional chief investment officer, South Asia-Pacific says Bitcoin has “become legitimised to a certain extent”.
Speaking on a panel at The Edge Singapore’s Year-End Investment Forum on Nov 30, Tay attributes this shift to exchange-traded products (ETPs) like BlackRock’s iShares Bitcoin Trust and Fidelity’s Physical Bitcoin ETP, which provide “easy access” to cryptocurrencies.
“Increasingly, some of the funds are also having crypto as part of their asset allocation, because in the last few years, your bonds and equities’ correlation has been very, very high. So, how do you diversify further?” says Tay.
That is among the reasons why there has been a surge in interest in cryptocurrencies, and perhaps a coming surge in price, says Tay to some 150 guests at the SGX Centre. “A lot more access means a lot more capital. If there is more capital chasing a few things, you know what happens right? Similar to property prices in Singapore.”
Tay says he attempted to buy Bitcoin earlier this year when prices “came off to US$55,000”, but UBS’s legal and compliance team rejected the request. “So, I’m not allowed to buy [cryptocurrency]. But if I was allowed to buy, I would have at least 10% of that in there.”
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Bitcoin was trading in the US$50,000 range in February, before breaking US$60,000 later that month. Compared to the US dollar, Bitcoin has risen 119% year to date, and is now trading around US$96,000.
US$144,000 ‘upside target’
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Another panellist was more conservative despite sharing Tay’s optimism on Bitcoin, saying his preferred exposure to cryptocurrency would be “anywhere from 5% to 8%” of his personal portfolio.
This panellist, who requested that his comments not be attributed, says Bitcoin has “already crossed” his “mid-term resistance” of US$74,000.
He now holds an “upside target” of US$144,000 on Bitcoin as swings of 20% to 30% are “not uncommon”. He also cites a “psychological support of around US$85,000” for Bitcoin.
UBS’s Tay, in turn, says he would look at cryptocurrency purely for diversification purposes. “I don’t look at it as a target… I’ll have it there because I want to make sure that the portfolio itself — the various components that I have — are as uncorrelated as possible. I try to build maybe 10 to 12 uncorrelated return streams so that I can actually hit my target return at the end of the day.”
That said, Bitcoin’s wild swings could prove too tempting for the undisciplined investor, warns Tay. “Greed is one thing, because once you put in money and 10% of it is in Bitcoin, if it goes up by 100%, you’ll be tempted to switch more into it. Don’t. Look at it as diversification.”
Photo: The Edge Singapore
