Brown University’s endowment invests $5 million in Bitcoin ETFs

Brown University’s endowment recently added bitcoin exchange-traded funds to its investment strategy, with a purchase of $4.9 million last quarter. This investment included the acquisition of 105,000 shares of BlackRock’s iShares Bitcoin Trust exchange-traded fund, as reported in a Form 13F filing with the Securities and Exchange Commission. While this purchase represents a small percentage of the endowment’s $7.2 billion in assets, amounting to less than 0.07%, it signals a growing trend among institutional investors to diversify their portfolios with exposure to cryptocurrency.

The adoption of these ETFs, which offer investors exposure to the volatile world of digital currencies, has been witnessed in the portfolios of various allocators, such as the State of Wisconsin Investment Board and the state of Michigan Retirement System. A research paper by BlackRock in 2024 highlighted that allocating 1% to 2% to bitcoin in a portfolio can introduce similar levels of risk as investing in the average large-cap tech stock. However, as the exposure to bitcoin increases within a portfolio, its impact on overall portfolio risk becomes more pronounced. For instance, a 4% allocation to bitcoin could contribute to 14% of total portfolio risk, whereas a 1% to 2% allocation would result in a risk exposure between 2% to 5% of the total portfolio risk weight.

Brown University’s endowment yielded a return of 11.3% in fiscal 2024, placing it as the second-highest performing among Ivy League endowments behind Columbia University’s 11.5% return.

This move by Brown University reflects a broader interest among institutional investors to explore cryptocurrency as an alternative asset class for diversification and potential returns. As the field of digital assets continues to evolve and gain acceptance within traditional investment landscapes, it is likely that more endowments and funds may follow suit in exploring exposure to this emerging asset class..ComponentPlacement of 11.3% in fiscal 2024, making it the second-best performing among Ivy League endowments, trailing only Columbia University’s 11.5% return in the same period.

The endorsement of bitcoin ETFs within Brown University’s endowment signifies a notable shift towards embracing the potential of cryptocurrencies as a diversification strategy and an investment opportunity. This move is indicative of a broader trend within the institutional investment space towards recognizing and capitalizing on the potential benefits of exposure to digital assets. As the financial landscape continues to evolve and adapt to the changing dynamics of the digital economy, it is likely that more educational institutions and investment funds will explore avenues to include cryptocurrencies as part of their diversified investment portfolios.