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- Investment Unit of Morgan Stanley considering cryptocurrency investment
- Risk appetite of Morgan Stanley increasing post hedge fund success
Counterpoint Global, a unit of Morgan Stanley’s Investment management is currently exploring the possibility of including cryptocurrency as a suitable avenue for investment. The entity manages assets worth $150 billion and is known for making investments which offer long term capital appreciation. The investments are considered in firms with an established brand image, strong free cash flow yields and favourable returns on invested capital trends. It focuses on value added investment results through bottom-up analysis and qualitative judgement instead of top-down forecasting.
Impact of Cryptocurrency Investment
The affirmation by a firm like Morgan Stanley would put the heft of an age long belief of a volatile asset class which is still struggling to win over the acceptance of a bulk of the traditional finance industry.
Proceeding with the investment would require approval by the firm and regulators coupled with tight scrutiny by federal authorities. Morgan Stanley does have a 11% stake in the bitcoin-laden business intelligence company called MicroStrategy
Internal analysis of the firm believes that bitcoin has the potential to compete against the US Dollar, but also acknowledged the fact that if bitcoins are hoarded, the weaker would be its appeal to be used against a currency
The fund has its experience in the mutual fund space and has racked up the ranking as well. This group is responsible for oversight of 19 funds and 5 of them have delivered gains in excess of 100% in 2020. This was catapulted by the fact that the unusually high returns were aided by bets on firms benefiting from the pandemic such as e-commerce and streaming entertainment. Some of the investments included Amazon, Zoom Video communications etc. Despite its size, the group relies on concentrated investments and has stakes in just about 200 companies.
Performance of Counterpoint Global Fund
The recent performance of the fund has been consistent and encouraging as it witnessed an increase of 50% in the past 6 months. The fund which was hovering around $40 has now moved to $60 in the past 6 months.
The fund has taken efforts to ensure that all its investments are spread across various sectors and regions so that it can be insulated against sector or region specific shocks
Though the talk about the funds taking the plunge is doing rounds but there is a possibility of Morgan Stanley choosing to stay away from Bitcoin investments. Rallies in the past pertaining to cryptocurrency have attracted interests which ultimately have fizzled out.
Most of the scepticism in the industry is circulated on Bitcoin’s unpredictable price swings and a foresight on how it will perform after a given point of time. Institutional and other faithful investors are not impacted by this and continue pouring into the cryptocurrency through vehicles including the Grayscale Bitcoin Trust
Even institutional investors, barred by the rules of their funds from holding Bitcoin directly, have turned to such trusts. In the case of Wall Street firms, inability to offer Bitcoin to those clients raises the risk of losing them to other managers. This may spark fresh discussions in the industry about opening up to the various asset classes.
