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Fixed-income titan Pimco is starting to embrace cryptocurrencies, CIO says

Fixed-income titan Pimco is starting to embrace cryptocurrencies, CIO says

20 Oct 2021

Daniel Ivascyn of PIMCO in 2012

Steve Marcus | Reuters

Fixed-income giant Pimco has dabbled in cryptocurrencies and plans to gradually invest more in digital assets that have the potential to disrupt the financial industry, according to chief investment officer Daniel Ivascyn.

“Now we’re looking at potentially trading certain cryptocurrencies as part of our trend-following strategies or quant-oriented strategies, then doing more work on the fundamental side,” Ivascyn said in an interview with CNBC’s Leslie Picker for Delivering Alpha. “So this will be a gradual process where we spent a lot of time on the internal diligence side speaking to investors. And we’ll take baby steps in an area that’s rapidly growing.”

His comments came as bitcoin notched a fresh all-time high Wednesday following the successful launch of the first U.S. bitcoin futures exchange-traded fund. It is widely viewed as a landmark for the nascent crypto industry, which has long been pushing for greater acceptance of digital currencies on Wall Street.

The world’s largest cryptocurrency climbed around 4% to $66,416.86, topping a previous record of $64,899 set in mid-April.

Ivascyn said some of Pimco’s hedge fund portfolios are already trading crypto-linked securities.

“We’re trading from a relative value perspective. So we’re not taking directional exposure, but we’re looking to take advantage of mispricings between the cash product, popular trust that trades on the exchange, and then the futures,” Ivascyn said. “So that was a starting point for us in a very narrow segment of our business.”

More and more institutions have started embracing digital tokens.

Large financial companies including PayPal and Fidelity have made moves into cryptocurrency while the likes of Square and MicroStrategy have used their own balance sheets to buy bitcoin. Morgan Stanley was first among banks to offer bitcoin funds to its clients, and Goldman Sachs quickly followed with an announcement of its own.

“You have to understand decentralized finance, because it will be disruptive, and it very well may disrupt our industry, in our business in particular,” Ivascyn said. The firm is “thinking about scenarios where this could take us to ensure that we are competitively prepared to deal with what’s a rapidly changing environment that offers a pretty significant value proposition, particularly for younger generations, or the new generation of the investment community.”