Since mid-January, the first spot-based Bitcoin ETFs have been trading in the US. So far, these products have attracted enormous interest, with inflows of more than $7.3 billion. Now, investment banking giant Morgan Stanley wants to include these vehicles in twelve of its funds, with a weighting of up to 25%.
As a global systemically important bank, Morgan Stanley is one of the most influential financial institutions in the world. In March 2021, the investment bank made investments in three indirect crypto funds available to its clients due to high demand. Now, Morgan Stanley wants to add real Bitcoin to its portfolios, according to a filing with the US Securities and Exchange Commission (SEC).
Subscribe to our newsletter
The best articles of the week, directly delivered into your mailbox.
Bitcoin exposure of over $12 billion in managed assets
Specifically, the bank requested permission to invest in Bitcoin in twelve mutual funds. In total, these funds manage $12.13 billion in assets, according to research by CVJ.CH. The majority are the US "Advantage" and "Growth" funds, with $4.5 billion and $3.4 billion in assets, respectively. However, the international "Advantage" portfolio is also expected to invest a portion of its $3.3 billion in Bitcoin.
Due to the legal structure of the funds, there is a maximum allocation of 25%. This is the absolute maximum, with Morgan Stanley likely to invest in Bitcoin in the single-digit percentage range. Investments will be made through Bitcoin futures or ETFs, with implementation handled by a subsidiary in the Cayman Islands.
" The Fund may have exposure to bitcoin indirectly through cash settled futures or indirectly through investments in pooled investment vehicles and exchange-traded products that invest in bitcoin ('Bitcoin ETFs') [...] Although the Fund does not directly invest in bitcoin, the Fund’s indirect investments in bitcoin are exposed to risks associated with the price of bitcoin, which is subject to numerous factors and risks." - Morgan Stanley SEC filing
Wall Street's appetite remains undiminished
Morgan Stanley is far from the only global bank looking to offer clients exposure to Bitcoin. In the seven weeks since their approval, the new Bitcoin ETFs have seen net inflows of $7.35 billion, despite billions in withdrawals from insolvent crypto firms FTX, Genesis and Celsius. BlackRock's IBIT reached $10 billion in assets under management in record time. Fidelity's FBTC is also about to pass $5 billion.
On the one hand, ETF providers themselves are proposing Bitcoin allocations to their clients. The sheer volume of these products - which reached $7.6 billion last Wednesday - is now putting pressure on brokers. Many investment advisors at banking giants are still unable to offer clients exposure to cryptocurrencies. Morgan Stanley is now taking the first step, and other financial giants are likely to follow suit.
