A top executive at Jefferies says the billion-dollar investment firm is cutting some gold from its portfolio in favor of Bitcoin.
As Bitcoin continues to consolidate above the $20,000 range, the global head of equity strategy at Jefferies, Christopher Wood, says the company is purchasing the top cryptocurrency at the expense of the precious metal.
The firm, with $51 billion in assets under management as of Q3 2020, is converting some of its gold holdings in its long-only global portfolio for US dollar-denominated pension funds, which was created in 2002, according to Business Standard. Wood says he plans to increase exposure to cryptocurrency in this portfolio if the market sees a correction after its recent pump.
“The 50 percent weight in physical gold bullion in the portfolio will be reduced for the first time in several years by five percentage points with the money invested in Bitcoin. If there is a big drawdown in bitcoin from the current level, after the historic breakout above the $20,000 level, the intention will be to add to this position.”
The allocation in this particular fund is 45% in physical gold bullion, 30% in Asia ex-Japan equities, weighted according to the long-only thematic portfolio, 20% in unhedged gold mining stocks and 5% in Bitcoin.
Wood notes that he is still bullish on gold, as he believes central banks will continue to adopt loose monetary policies.
Meanwhile, Weiss Rating analysts Juan Villaverde and Bruce Ng suggest that Bitcoin could have a much larger upside if other companies like Jefferies begin to favor these asset classes equally over bonds as a hedge against inflation and economic turbulence.
“…Roughly $30 trillion is sitting in government bonds. Suppose 10% of that amount finds its way into gold and Bitcoin. That works out to an exodus of $3 trillion. And if that is split evenly, we’d end up with…
$1.5 trillion going into gold – which is 15% of gold’s market cap (now about $10 trillion). And…$1.5 trillion going into Bitcoin – which is 4.4 times its market cap (now about $338 billion).
Due to Bitcoin’s much lower market cap and trading volume, it has the potential to rise far faster than gold… as new money from disillusioned bond investors pours in.”
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