UK Pension Scheme Becomes First to Make Direct Bitcoin Purchase

TLDR

• First UK pension fund makes historic 3% Bitcoin allocation of their £50 million ($65 million) portfolio
• Direct Bitcoin investment chosen over ETFs or proxies, with private key split between 5 institutions
• Decision followed extensive trustee consultations covering ESG, investment case, and security
• Cartwright launching Bitcoin Employee Benefits scheme allowing direct BTC payments to staff wallets
• Investment represents larger allocation (3%) compared to other institutional pension investments like Wisconsin’s 0.1%

In a historic first for the United Kingdom’s pension industry, an unnamed pension scheme has allocated 3% of its £50 million ($65 million) portfolio directly to Bitcoin.

The move, guided by pension specialist Cartwright, marks the first time a UK pension fund has made a direct cryptocurrency investment rather than using traditional investment vehicles like ETFs or proxy investments.

The investment, valued at approximately £1.5 million, came after what Cartwright described as a “rigorous training and due diligence process.”

The decision-making process involved lengthy consultations with the scheme’s trustees, focusing on environmental, social, and governance (ESG) concerns, investment potential, and security measures.

Steve Robinson, head of investment implementation at Cartwright, explained that the Bitcoin allocation was chosen to “reduce reliance on employer contribution.”

The pension scheme cited its “long investment time horizon” as a key factor in the decision-making process.

The security arrangement for the Bitcoin investment involves a sophisticated approach to private key management.

Rather than centralizing control, the private key has been split between five independent institutions, creating multiple layers of security for the pension fund’s digital assets.

This 3% allocation stands out when compared to other institutional pension investments in the cryptocurrency space. For context, the State of Wisconsin pension fund, which made headlines as the first U.S. state pension plan to invest in Bitcoin through spot ETFs, allocated only 0.1% of its assets to the cryptocurrency.

The development comes as other major UK financial institutions show increasing interest in digital assets. Legal and General, a pension and investment firm managing $1.5 trillion in assets, announced in October that it would consider offering tokenized funds.

Beyond the direct Bitcoin investment, Cartwright is expanding its cryptocurrency services through a new Bitcoin Employee Benefits scheme.

This initiative will enable employers to pay Bitcoin directly into wallets created for their staff. According to Cartwright, five companies have already expressed interest in this innovative benefits program.

The broader institutional adoption of cryptocurrency extends beyond the UK. In South Korea, the national pension service reported approximately $34 million in exposure to MicroStrategy, a company known for its substantial Bitcoin investments.

Similarly, the State of Michigan Retirement System held roughly $18 million in shares of Bitcoin and Ethereum exchange-traded products as of September 30.

The timing of this investment coincides with changes in the UK’s political landscape. Following the July election, which saw Labour take control from the Conservatives for the first time in 14 years, questions arose about the future of digital asset regulation in the country.

Currently, the Financial Conduct Authority (FCA) serves as the UK’s financial watchdog, maintaining oversight of cryptocurrency firms and taking enforcement actions when necessary.

The new Labour government released its proposed budget in November, though experts suggested that digital asset regulation might not be an immediate priority.

Glenn Cameron, head of digital assets at Cartwright, told Corporate Advisor magazine that the investment followed extensive consultations where ESG considerations, investment potential, and security measures were thoroughly examined.

While Cartwright’s exact assets under advisement remain unclear, the firm employs between 51-200 people according to LinkedIn and operates from its base in Hampshire, UK.

The pension scheme’s investment represents a new milestone in the institutional adoption of cryptocurrency in the UK financial sector. This direct investment approach differs from the more common method of gaining crypto exposure through ETFs or other investment products.

Several other pension funds worldwide have shown interest in cryptocurrency investments during 2024, suggesting a growing trend in the institutional acceptance of digital assets as a legitimate investment class for retirement funds.