One of Baillie Gifford's fund managers has said she is gaining exposure to bitcoin by investing in companies which mine the digital currency, rather than by investing in the currency itself.
Kirsty Gibson, who is co-manager of the £4bn Baillie Gifford American fund and of the the £750mn Baillie Gifford US Growth trust, said the trust aims to invest in innovative companies.
This includes areas "where it can be difficult for us today to imagine what the world would be like if the products of those companies are part of that world".
Among the areas where the trust is focused are augmented reality and the metaverse but the trust also an investment in unquoted cryptocurrency business Blockstream, which Gibson believes is adding utility to the bitcoin universe.
The opportunity is in the firms building the infrastructure.Gibson said: “It can be hard to imagine what the world would be like if we did have regular use of bitcoin and blockchain as a payments system.
"The problem at present is that bitcoin does not fulfil any of the traditional criteria of money as a means of exchange.
"Blockchain helps to fulfil some of those as it enables completely secure records to exist as part of its ledger. The problem is the ledger has to be updated in real time, making the process time consuming and expensive.”
Other funds within Baillie Gifford are invested in crypto through other firms, but the guiding principle is there are three options for those seeking exposure to the space.
One can invest in the bitcoin miners, the firms which provide bitcoin wallets, or the infrastructure behind bitcoin.
Gibson said: “We think companies that are bitcoin miners have basically the same characteristics as miners in more traditional sectors really.
"The opportunity is in the firms building the infrastructure, that is where they are trying to create a utility (use) for bitcoin, by decentralising the ledger, meaning the payments can be as secure as on traditional blockchain, but can also happen in real time, with the ledger only updated periodically.
"We can’t of course be sure which innovative companies are going to win, and we will make many mistakes. But what draws us to Blockstream is the founder’s reputation, and also the quality of the institutions already involved in this business.”
The Baillie Gifford US Growth trust was launched in 2018 and has returned 76.9 per cent over the past three years while its sector, the AIC North America, has returned 61.2 per cent.
It has struggled more recently, losing 32.7 per cent over the past year while its sector gained 10.4 per cent.
david.thorpe@ft.com
