Fidelity to add Bitcoin exposure to portfolio funds

Clients looking for “one-ticket” mutual funds or exchange-traded funds should soon be able to get some Bitcoin exposure once a key change to a couple of existing Fidelity products takes effect.

Fidelity Investments Canada ULC announced Monday it is planning to add a small amount of Bitcoin exposure to its All-in-One Growth and All-in-One Balanced funds. The all-in-one products are available both as mutual funds and ETFs.

In November, Fidelity launched the Fidelity Advantage Bitcoin ETF and a corresponding mutual fund, which invest directly in the cryptocurrency. The all-in-one funds will add a small allocation to Fidelity’s Bitcoin fund.

While Bitcoin is a volatile investment with high risk, Fidelity said it decided to add exposure to the cryptocurrency because of its “diversification benefits” and “potential to improve risk-adjusted returns going forward.”

Chris Pepper, vice-president of corporate affairs at Fidelity, said that, subject to regulatory approval, the all-in-one balanced fund will have an allocation of approximately 2% to the Bitcoin fund, while the growth fund’s Bitcoin allocation will be around 3%. Fidelity is filing prospectus amendments in the next 10 days, he said.

The all-in-one growth fund currently is about 85% invested in equities and 15% in fixed income, while the balanced fund is split about 60% to 40%.

Both funds currently have “low to medium” risk ratings but those will change to “medium” once the Bitcoin exposure is added. The Fidelity Advantage Bitcoin ETF, which had $20.7 million in net assets as of last week (the mutual fund had $1.9 million), has a “high” risk rating.

Bitcoin was trading around US$43,000 on Monday. The cryptocurrency has seen wild fluctuations over the past year, dropping below US$30,000 in July before rebounding above US$67,000 in November.

Many advisors are divided over whether to include cryptocurrencies in portfolios, and some firms don’t allow clients to hold cryptocurrencies.

Pepper said Fidelity is adding diversification to its all-in-one suite with the Bitcoin exposure.

“Conventional mutual funds are able to hold up to 10% in alternative mutual funds, including cryptocurrency funds,” he wrote in an email.

“It is important to consider that there are investment characteristics of Bitcoin, such as relative low correlation to equities and fixed income, that have the potential to enhance diversification and dampen overall portfolio volatility.”