The Nordrheinische Ärzteversorgung (NAEV), a pension fund for doctors in North Rhine-Westphalia, has committed €17 million to cryptocurrency investments after a two-year testing period. The fund increased its allocation to up to 0.5% of total assets, focusing on a strategy involving blockchain companies. This marks the fund's first entry into the crypto space through exchange-traded products.
The Nordrheinische Ärzteversorgung (NAEV), the first-pillar pension fund for physicians in Germany's North Rhine-Westphalia state, has ventured into cryptocurrency following an extensive two-year evaluation. Initially, the fund tested two investment strategies, allocating a maximum of 0.1% of its total assets—approximately €17 million—to these approaches.
Chief investment officer Bernd Franken explained that the first strategy involved a capital-weighted basket of the 10 largest cryptocurrencies. The second was a niche equity fund, with about 80% invested in crypto and blockchain companies and up to 25% directly in cryptocurrencies. These investments were made via exchange-traded products (ETPs), with performance closely monitored amid high volatility.
Franken noted that returns during the test period ranged between 100% and 300%, despite extreme market swings. However, at the end of testing, NAEV divested from the first strategy, viewing it as speculative like gold, with no intrinsic value driving price movements. The fund retained the second strategy, citing its strong performance as a foundation for future growth.
The current investment volume remains under 0.5% of NAEV's total assets, positioning crypto as a minor satellite holding rather than a core portfolio element. This cautious approach aligns with broader trends in Germany, where pension funds often avoid cryptocurrencies due to their volatility and regulatory challenges.
Consultancy managing director Clemens Schuerhoff highlighted risks including decentralized blockchain operations, counterparty issues, and difficulties integrating such assets into traditional risk models. Germany's Fund Location Act permits special funds to allocate up to 20% to cryptocurrencies, though direct investments via blockchain wallets are rare. For comparison, a UK pension fund allocated 3%—or £1.5 million—to bitcoin last year after due diligence, seeing a 56% increase in value over one year. In the US, an August executive order enabled defined contribution plans to include digital assets.
