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 adding crypto-components 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 paper contributes to the ongoing debate in the area of financial innovations on the purpose and solidity of cryptocurrencies as an asset class.