Cryptocurrencies as Pension Fund Components: Smart Move or Drinking the Kool-Aid

Abstract

This study investigates whether cryptocurrencies can be considered a viable addition to pension funds. Using the regulatory setting of Switzerland, it is assessed whether crypto components added to a standard pension fund portfolio has positive effects on the fund’s risk and return figures. The empirical data supports the notion that cryptocurrency components may well increase the yield of a pension fund portfolio, yet this enhancement of yield comes at slightly higher risk levels. This increase in risk can be mitigated by adding an actively managed crypto component to the portfolio rather than a passive investment product. The article contributes to the ongoing debate in the area of financials innovations on the purpose and solidity of cryptocurrencies as an asset class.

Keywords: cryptocurrency, pension fund, portfolio management, financial regulation

JEL Classification: G11, G18, G23, H55, J33