From waiting to accepting, American university endowment funds are embracing cryptocurrency

Compiled by: Felix, PANews

As the cryptocurrency craze has grown in recent years, some investors have seen the potential to add to digital portfolios. Endowments and foundations, which were on the sidelines a few years ago, have become more open to investing and have become one of the first institutional investors to accept cryptocurrencies.

Pantera Capital, a California-based venture capital fund focused on digital assets, reported an eight-fold increase in the number of its endowment and foundation clients since 2018.

Endowments are designed to provide funding for nonprofit institutions such as hospitals, churches, or universities. University endowments are pools of money accumulated by academic institutions, usually in the form of charitable donations. These funds are used to support teaching and research and can be allocated to various assets for investment purposes.

Recently, the one-year-old University of Austin is raising a $5 million Bitcoin fund for its $200 million endowment fund. This is the first such fund among American endowments and foundations.

The University of Austin aims to develop a five-year Bitcoin holding strategy. Chad Thevenot, vice president of the University of Austin, said, "We believe that Bitcoin has long-term value, just as we believe that stocks or real estate have long-term value."

Last October, Georgia's Emory University became the first university endowment fund to disclose its Bitcoin ETF holdings. According to documents submitted to the U.S. SEC, the university holds nearly 2.7 million shares of Grayscale Bitcoin Mini Trust, worth more than $15 million, and also holds 4,312 shares of Coinbase.

In 2018, Yale University’s endowment invested in two cryptocurrency venture capital funds when the price of Bitcoin was less than one-tenth of today’s price. One was managed by Andreessen Horowitz (a16z), and the other was Paradigm, founded by Coinbase co-founder Fred Ehrsam and former Sequoia Capital partner Matt Huang.

In addition, some of the largest university endowments in the U.S. appear to have been quietly buying cryptocurrencies through accounts at Coinbase and other exchanges, according to sources. These include Harvard, Yale, Brown, the University of Michigan, and several other universities.

Britt Harris, former chief investment officer of the University of Texas/Texas A&M Investment Management Company (with assets of $78 billion), said that under his leadership, the largest university endowment fund in the United States made a "small experimental" investment in a cryptocurrency venture capital fund in the early 2020s, considering it a "potentially attractive future strategy."

Additionally, the Rockefeller Foundation’s Lai said it would consider increasing investments in cryptocurrencies if their user base “broadens and deepens.”

In addition to university endowments, cryptocurrencies are also becoming increasingly popular among pension funds, indicating a shift in perceptions among younger generations.

Pension funds such as Wisconsin have previously reported holding Bitcoin ETFs. In addition, the Jersey City Municipal Pension Plan in New Jersey announced that it would allocate 2% of its assets to ETFs.

According to a Bitget Research report, as many as 20% of Generation Z and Generation Alpha are willing to receive their pensions in the form of cryptocurrency. 78% of respondents said they trust "alternative retirement savings options" more than traditional pension funds, highlighting a significant shift toward "decentralized finance and blockchain-based solutions."

It is worth mentioning that “follow-the-trend” investment has also aroused the vigilance of some people.

“I am very concerned about institutional investors getting into financial assets that are purely speculative in nature and that don’t provide much of a hedge relative to other risk assets,” said Eswar Prasad, a professor at Cornell University. “Bitcoin seems to rise and fall with the prices of other risk assets like stocks, but its volatility is much greater.”

Brian Neale of the University of Nebraska Foundation believes that due to the low adoption rate of cryptocurrencies among allocators, he does not consider cryptocurrencies to be an "institutionally investable" asset class. He currently does not plan to enter the field until more peers join and the regulation is clearer. He also called for greater regulatory clarity, such as the U.S. SEC's guidance on cryptocurrency investments, to regulate the industry.

Related reading: BB Research’s in-depth analysis of the cryptocurrency industry: Deep moment, cryptocurrency stocks take advantage of the trend