Key Takeaways:
- Fidelity investments to include bitcoin exposure in its portfolio funds.
- To “enhance risk-adjusted returns,” Fidelity Canada has added Bitcoin exposure to two ETFs.
Once a significant adjustment to a couple of existing Fidelity products takes effect, clients opting for “one-ticket” mutual funds or exchange-traded funds should soon be able to obtain some Bitcoin exposure.
On Monday, Fidelity Investments Canada ULC said that its All-in-One Growth and All-in-One Balanced funds will get a modest amount of Bitcoin exposure. The all-in-one products are available as mutual funds and exchange-traded funds (ETFs).
In November, Fidelity introduced the Fidelity Advantage Bitcoin ETF and a companion mutual fund, which invest in bitcoin directly. In addition, Fidelity’s Bitcoin fund will receive a small allocation from the all-in-one funds.
Although Bitcoin is a volatile and high-risk investment, Fidelity said it opted to increase its exposure to the cryptocurrency because of its “diversification benefits” and “potential to improve risk-adjusted returns in the future.”
According to Chris Pepper, vice-president of corporate affairs at Fidelity, the all-in-one balanced fund would have a Bitcoin allocation of roughly 2%. In comparison, the growth fund will have a Bitcoin allocation of around 3%, subject to regulatory approval. He said Fidelity will file prospectus amendments in the next ten days.
The all-in-one growth fund is now invested about 85% in equities and 15% in fixed income, while the balanced fund is split roughly 60% to 40% in equities and fixed income.
Both funds presently have “low to medium” risk ratings, but once Bitcoin exposure is introduced, those ratings will change to “medium.” The Fidelity Advantage Bitcoin ETF has a “high” risk rating, with $20.7 million in net assets last week (the mutual fund had $1.9 million).
On Monday, Bitcoin was trading at over $43,000. Over the last year, the cryptocurrency has experienced tremendous swings, dipping below US$30,000 in July before rising beyond US$67,000 in November.
According to Pepper, Fidelity is diversifying its all-in-one suite with the Bitcoin exposure.
“Conventional mutual funds can hold up to 10% in alternative mutual funds, including cryptocurrency funds,” he wrote in an email.
“It’s crucial to keep in mind that bitcoin has some investment characteristics, such as a low correlation to equities and fixed income, that could help diversify your portfolio and reduce overall volatility.”
Many advisors are split on whether or not to include cryptocurrencies in their customers’ portfolios, and other businesses do not allow clients to keep them.
