Booming Bitcoin Powers Up Traditional Investment Funds

Traditional equity mutual funds, once struggling to keep pace, have found an unexpected helper in Bitcoin. In the past year, the cryptocurrency surged by nearly 100%, boosting select fund portfolios across a $9 trillion actively managed sector.

Bitcoin’s Big Boost to Mutual Funds

Of the ten funds that included Bitcoin ETFs in their portfolios, an impressive seven beat their benchmarks by an average of 22 percentage points over the past 12 months through July.
For example, the Kinetics Internet Fund (ticker: WWWFX)—which allocates about half of its $348 million assets to Grayscale Bitcoin ETFs—outperformed the S&P 500 by 23 percentage points, largely thanks to its crypto exposure.

Why Bitcoin Became the Unexpected Hero

For years, mutual funds faced outflows as investors flocked toward lower-cost index and passive products. However, Bitcoin’s meteoric rise offered a rare edge. Even though stock picking played a role, Bitcoin added a significant outsize bump to returns, according to Bloomberg Intelligence strategist David Cohne.
Moreover, a simple portfolio experiment shows the impact: A classic 60% stocks, 40% bonds mix that adds just 5% Bitcoin would have delivered over 200% return in the decade ending 2024—nearly double the roughly 96% gain from the standard portfolio.

From Fringe to Institutional Legitimacy

Increasingly, institutional managers see Bitcoin not just as speculative, but as a strategic asset. With more favorable regulation evolving and Wall Street becoming comfortable with crypto, Bitcoin is gaining legitimacy.
Patient Capital, a $2.2 billion manager, recently added Fidelity’s Bitcoin ETF (FBTC) to its portfolio. Its CIO, Samantha McLemore, said the firm’s flexibility and readiness to explore early opportunities helped them overcome limitations in mandate guidelines.

Market Implications and Risks

Yet Bitcoin’s volatility remains a key concern. Although it bolstered performance, only three of those ten funds saw inflows this year—highlighting investor caution around fee-based products. Additionally, naming sector constraints might bar many funds from entering crypto.
Cohne suggests that unless funds justify higher fees with Bitcoin-enhanced returns, they may face pressure to reduce costs to retain investors.

Looking Ahead: More Funds May Follow

Bitcoin’s strong momentum has attracted fund managers seeking an edge. As regulators clarify rules and ETFs gain traction, more funds could add Bitcoin exposure if mandates allow. Yet, success depends on balancing investor appetite with fee-sensitive, performance-based value delivery.

Regulated crypto exposure may soon become mainstream, not fringe. Still, mutual fund investors must critically assess whether Bitcoin inclusion matches their risk and investment objectives, rather than assuming it’s a guaranteed win.

#FundManagement#MutualFundsBitcoinCryptoETFInvestmentTrends