Christopher Wood, the global head of equity at Jefferies, a global financial services company, says the firm will reduce exposure to gold in favor of bitcoin. He adds that there are plans to increase the crypto component of Jefferies’ long-only global portfolio for U.S. dollar-denominated pension fund if and when the bitcoin price drops from current levels. As a result of this decision, 5% of the fund will now consist of bitcoin.
The Case for Bitcoin
Before making the decision, Jefferies allocated funds as follows: 50% towards (now 45%) physical gold bullion, 30% to Asia ex-Japan equities, and 20% to unhedged gold mining stocks. Writing in his weekly “Greed and Fear” note to investors, the global head of equity explains the multinational investment bank’s rationale for choosing bitcoin over gold at this stage. Wood says:
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.
Bitcoin, which recently surged past the $24,000 mark, has been rising since its infamous crash in March. Since Jan. 1, BTC has grown by more than 200% buoyed by rising institutional investors’ interest in the most dominant crypto.
Gold Losing and Bitcoin Gaining
Despite Jefferies’ decision to opt for bitcoin at the expense of gold, Wood remains bullish on the precious metal. He says:
The yellow metal should rally again if the Fed stays dovish in the face of the dramatic cyclical recovery that is coming on the other side of the pandemic, in line with greed & fear’s base case.
Meanwhile, the move by Jefferies to trim the gold component of its long-only pension fund appears to undercut Peter Schiff’s denial that institutional investors are replacing gold with BTC. In his recent remarks, the gold bug and bitcoin opponent argued that large companies were not buying bitcoin using proceeds from gold sales.
Schiff’s latest comments follow predictions by strategists at JP Morgan that institutional investors will sell some of their gold holdings and use the proceeds to finance bitcoin purchases.
What are your thoughts on Jefferies’ bitcoin strategy? Share your views in the comments section below.
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