Yahoo Finance Bitcoin goes mainstream as first City fund house buys £550m of 'digital gold'
British fund house Ruffer has become the City's first major investment company to buy Bitcoin for DIY investors adding £550m of the digital currency last month.
The firm, which manages some £20bn of Britons' savings, added Bitcoin into the popular Ruffer Investment Company and its £3.5bn Total Return Fund.
This comes as the value of Bitcoin broke through the $20,000 (£14,815) for the first time. The digital currency has been one of the best performing investments this year and has nearly tripled in value.
Ruffer becomes the first mainstream City firm to buy the currency in what could be a landmark moment as Bitcoin becomes adopted by professional investors.
Bitcoin is the largest and oldest digital currency dating back to 2009 and is the most common way to own a cryptocurrency. It is sometimes referred to as “digital gold” due to its finite supply and low correlation with stock and bond markets.
Ruffer manages 10 funds, including its flagship £3.5bn Ruffer Total Return Fund and £450m Ruffer Investment Company. Both are "absolute return" funds that aim to not lose money and generate small returns over three-year periods.
The firm said it had added the crypto currency to all of its funds which have this "all weather" approach.
A spokesperson said: “We now have an allocation to Bitcoin to help us meet our objective of preserving capital. We bought Bitcoin primarily as a protective move for portfolios.
"It diversifies our investments in gold and inflation-linked bonds and it acts as a hedge to some of the risks that we see in a fragile monetary system and distorted financial markets."
Ruffer bought the crypto-asset in November when it traded at an average price of $16,645 but ranged from $13,575 up to $19,672, meaning the fund house could have already made substantial gains on its £550m investment.
This year’s rally has prompted a mixed response from investors and financial planners. The most common argument against owning Bitcoin is that it has no intrinsic value and is too volatile to be considered a "safe haven" investment, as gold is.
Amyr Rocha Lima, a financial planner at Holland Hahn & Wills, said: “Bitcoin shows many characteristics of a speculation rather than an investment. The volatility alone is reason enough for people not to invest in it other than with money they wouldn't be seriously harmed by losing.”
However, it has an extremely loyal fan base and is growing in popularity with well-known technology companies such as PayPal and Revolut now allowing users to use Bitcoin as legitimate currency.
Danny Scott, of CoinCorner, a trading site, said: “Investors are being drawn to it because the price has the potential to rise at a quicker rate than gold and it has similar properties to the yellow metal. It is also cheaper to store.”
How to buy it
You can buy Bitcoin on dedicated exchanges or via general stockbrokers. The largest exchange is Coinbase, which charges 0.5pc on transactions and a £3 dealing fee. Digital bank Revolut allows Bitcoin trading, as does eToro. Plus500, sells “contracts for difference” which allows you to track the price of Bitcoin without owning it.
Bitcoin can be stored in digital “wallets” on some trading platforms, while others also allow it to be transferred out into more secure online wallets or even on to hard drives.
Felix Milton of Philip J Milton, a financial planning firm Milton, said: “Owning Bitcoin is not like having money in the bank. There is no protection and exchanges can be hacked. Moving Bitcoin on to a hard drive is the safest way to store it but can be a technical challenge.”
