Skip to main content
PGIM LogoPGIM Logo
    • Megatrends
    • Annual Best Ideas
    • Quarterly Market Outlooks
    • Market Events
    • Thought Leadership
    • Events & Webinars
    • ESG Investing
    • Investing in Alternatives
    • Opportunities in EM
    • Risk Management
    • Clients We Serve
    • Defined Contribution
    • Financial Advisors
    • Institutional Relationships
    • Institutional Advisory & Solutions
    • Global Locations
    • Contact Us
    • Overview
    • Leadership
    • History
    • Diversity, Equity & Inclusion
    • Global Locations
    • Jennison Associates
    • PGIM Fixed Income
    • PGIM Private Capital
    • PGIM Real Estate
    • PGIM Quantitative Solutions
    • PGIM Portfolio Advisory
    • PGIM Investments
    • Montana Capital Partners
    • PGIM DC Solutions
    • Contact Us
    • Subscribe
    • Request for Information
    • Careers at PGIM
    • Job Opportunities
    • All News
    • Press Releases
    • In the News
    • Facts & Figures
    • Media Contacts
Cryptocurrency
In the News

Cryptocurrency May Not Be the Asset Class for Institutional InvestorsCryptocurrencyMayNotBetheAssetClassforInstitutionalInvestors

May 19, 2022

View Transcript
Share
  • Mail
  • LinkedIn
  • Twitter
  • Copy URL

Share

PGIM Chief Operating Officer, Taimur Hyat, joined “Bloomberg Surveillance” to discuss cryptocurrency investing in institutional portfolios. During the interview, Hyat shared insights from the latest installment of PGIM’s Megatrends research series, Cryptocurrency Investing: Powerful Diversifier or Portfolio Kryptonite?, which draws on the expertise and insights of more than 30 investment professionals across PGIM's fixed income, equity and private alternatives managers, as well as leading academics, venture capitalists and crypto investors, and explores why direct investments in bitcoin and its peers are currently unattractive in institutional portfolios. Hyat also explores how existing digital coins have failed to meet the three essential functions of a true currency, and highlights the compelling investment opportunities that the broader cryptocurrency ecosystem presents to investors, including blockchains.

Assets under management are as of 12/31/2021, based on company estimates and subject to change.

Read the transcript

  • –

    >> Taimur Hyat, the COO, sees little real-world evidence that cryptocurrencies deliver diversification and that they're effective inflation hedges or even possess the characteristics of a safe-haven asset. Well, PGIM COO Taimur Hyat joins us now. Taimur, as always, thanks so much for joining us. I can't believe I'm in New York when you're in London, but that's another matter. Talk to me about cryptocurrencies, and what kind of role are they playing in these crazy markets where we're seeing a massive sell-off and so much volatility.

    >> Well, I think they've actually confirmed lots of the things we've said about cryptocurrencies. You know, Bitcoin is a teenager this year -- first trade happened in 2009. And they've proven that many of the things that we thought cryptocurrencies might do for us actually still don't play out. Do they work as sort of digital gold? They haven't been a safe-haven asset. Do they work to protect us against inflation, Francine? Well, inflation has gone to 9% in the UK, where I am today, and, you know, Bitcoin and the other cryptocurrencies are heading in the other direction. Do they have any stable correlations to act as a diversifier versus other asset classes that investors are in? There's absolutely a lack of stability, and I think that's proven even more so now where they're basically acting as a sort of levered risk on trade, rather than a true diversifier of the portfolio. So I think that's just the beginning of the trouble for cryptocurrencies, because we still have the headwinds of regulation and central bank digital currencies, which should be quite negative for currencies in the future as well.

    >> Taimur, I love your straight talking. Tell me what you really feel on cryptocurrencies. But do they serve any purpose? Like, the markets are falling out of bed. And, you know, that compared to some of the other parts of the markets, is there an argument that says cryptocurrencies in the future will morph into something that could be used as a broader asset class?

    >> Well, we never say never at PGIM. We look at what the data says. We've tried to torture the last 12 years of data on Bitcoin. And, at the moment, there's no evidence of stable correlations, diversification, a real risk-return benefit that outweighs the drawdowns. But there are real opportunities, Francine, in the broader ecosystem -- the sort of accidental innovation that happened in the creation of cryptocurrencies, blockchains, distributed ledgers. We actually see four or five pretty important investment opportunities that we do think long-term investors should focus on.

    >> So, Taimur, where do you see actually the value longer term for some of these things? I guess the -- you know, some of the non-crypto believers say the concern is that it's getting such sway in retail parts of the markets that it's just impossible to ignore because a lot of clients want to know how they can get, you know, in on the action.

    >> I think, on the cryptocurrency side, it's important for institutional investors, long-term investors, to avoid the FOMO, to avoid the momentum trade. It's fine, as a retail investor, if you want to speculate in this for a small piece of your assets, just like you might gamble on other things. But for long-term institutional investors, Francine, the real opportunities are in the broader blockchain universe, not in the gold, but in the sort of shovels and picks. And that's in smart contracts. It's in private permissioned blockchains used by financial services company. It's in tokenization. It's in the infrastructure that central bank digital currencies will need to use that sort of underpins cryptocurrencies. And I think it's maybe just watching the metaverse space where there's a lot of losers, but maybe a couple of winners in the future, too.

    >> Taimur, I love that. Avoid the FOMO could actually apply. Wise, wise words could apply to so many things in life. Taimur, give me a sense of actually where you see this market volatility and the market sell-off, selling the broader markets? Like, where do we find the floor on the S&P 500?

    >> Yeah. I think, and we firmly believe, Francine, that we haven't seen the bottom of the dip yet, that there is -- this is just the beginning of a rollercoaster ride. Everything is now driven by inflation. Central banks want to retain their credibility on inflation. And I think as that inflation journey spills over into monetary policy, fiscal policy, markets, there's room to go. And our fear is absolutely inflation is quite structural and embedded now. It's in housing. It's in other things. It takes a long while to play out. But we also worry about, and I would think investors should be thinking about, recession risk. If central banks want to retain their credibility, they may go too far, too fast. And we may be in a recession already exacerbated by the war in Ukraine and other factors. So recession risk weighs on us quite a lot.

    >> But Taimur, is a recession now unavoidable? So we're seeing -- I have, you know, James from the News Desk just sent me a story about chicken wings in the US. Pre-COVID, they used to go for $19. Now they're going for $34. Is this symptomatic of inflation that's out of control that leads to stagflation, with monetary policy not being to avoid a recession?

    >> I think we'll all still hope, Francine, that somehow the central banks can engineer a soft landing and just kind of, you know, create the Goldilocks level of rate rises to protect inflation, but not send the economy into a deeper spiral downwards. And let's remember the US is in a much stronger place in terms of unemployment and growth than Europe or other Asian and emerging-market economies. But I do think our base case is that, given how late central banks have acted on inflation, how embedded expectations might become, that a recession is quite likely in the next 24 to 36 months.

    >> So what's your haven par excellence? If there is one, it's unclear exactly what form that takes.

    >> A safe haven right now?

    >> Yeah.

    >> We see a lot of our clients, certainly across PGIM, across our $1.5 trillion in assets, sitting in cash. I think the best strategy right now is to be fairly risk-off, be in the more conservative part of our various asset classes and wait to see a very volatile journey play out.

    >> And Taimur, if there's so much inflation, so much margin pressures in the US, how much worse is it going to get for the rest of the world?

    >> I think Europe has the added pressure of the Ukraine war and energy prices and commodity prices that perhaps the US is a little more immune to on the energy side. So I think there's going to be a fair amount of embedded inflation in many countries, and you're already seeing waves of this hit emerging markets. You know, the global economy, despite all the talk of delinking, is still very interconnected. And we are seeing these inflation waves spiral into emerging markets as well. So I think this rollercoaster ride has some space still to run. And I do think that we will have inflation as the central tenant of our markets move around the world for the rest of this year and much of next.

    >> Taimur, thank you so much for a great conversation. I mean, I know we plan most of our shows, but it's so good. We got lucky with you today coming on TV to talk about this market sell-off. Taimur Hyat there, COO at PGIM.

Explore megatrend
Cryptocurrency Investing

Powerful Diversifier or Portfolio Kryptonite?

Explore megatrend

You may also like

Long-dated Treasuries' horrible year seen as a one-off
In the News

Long-dated Treasuries' horrible year seen as a one-off

Mar 16, 2023

The conditions that made a 60/40 portfolio a loser in 2022 have receded, with duration set to make a partial comeback or better this year.

The race to contain SVB Fallout
Interview

The race to contain SVB Fallout

Mar 13, 2023

Gregory Peters, PGIM Fixed Income's Co-Chief Investment Officer, discusses the recent market volatility and what it might mean for the Fed.

The Glass Hammer: Marcella Sivilotti
In the News

The Glass Hammer: Marcella Sivilotti

Mar 13, 2023

Marcella Sivilotti, Chief Strategy Officer at PGIM, speaks with Glass Hammer.

  • Insights

    • Megatrends
    • Annual Best Ideas
    • Quarterly Market Outlooks
    • Market Events
    • Thought Leadership
    • Events & Webinars
  • Investment Themes

    • ESG Investing
    • Investing in Alternatives
    • Investing in Emerging Markets
  • Clients

    • Clients We Serve
    • Defined Contribution
    • Financial Advisors
    • Institutional Relationships
    • Advisory Solutions
  • About

    • Overview
    • Leadership
    • History
    • Diversity, Equity & Inclusion
    • Global Locations
    • Contact Us
    • Subscribe
    • Request for Information
  • Careers

    • Careers at PGIM
    • Job Opportunities
  • Newsroom

    • All News
    • Press Releases
    • In The News
    • Facts & Figures
    • Media Contacts
PGIM Logo
  • Terms & Conditions
  • Privacy Center
  • Accessibility Help
  • UK Regulatory Disclosures
  • Netherlands Regulatory Disclosures
  • Cookie Preference Center

For Professional Investors only. All investments involve risk, including the possible loss of capital.

This material is for informational and educational purposes only and should not be construed as investment advice or an offer or solicitation in respect of any products or services to any persons who are prohibited from receiving such information under the laws applicable to their place of citizenship, domicile or residence. PGIM is the principal asset management business of Prudential Financial, Inc. and a trading name of PGIM, Inc. and its global subsidiaries. PGIM, Inc. is a registered investment adviser with the U.S. Securities and Exchange Commission (“SEC”). Registration with the SEC does not imply a certain level of skill or training.

The information on this website is not intended as investment advice and is not a recommendation about managing or investing your retirement savings. In making the information available on this website, PGIM, Inc. and its affiliates are not acting as your fiduciary.    

In the United Kingdom, information is issued by PGIM Limited with registered office: Grand Buildings, 1-3 Strand, Trafalgar Square, London, WC2N 5HR. PGIM Limited is authorised and regulated by the Financial Conduct Authority (“FCA”) of the United Kingdom (Firm Reference Number 193418). In the European Economic Area (“EEA”), information is issued by PGIM Netherlands B.V. with registered office: Gustav Mahlerlaan 1212, 1081 LA Amsterdam, The Netherlands. PGIM Netherlands B.V. is, authorised by the Autoriteit Financiële Markten (“AFM”) in the Netherlands (Registration number 15003620) and operating on the basis of a European passport. In certain EEA countries, information is, where permitted, presented by PGIM Limited in reliance of provisions, exemptions or licenses available to PGIM Limited under temporary permission arrangements following the exit of the United Kingdom from the European Union. These materials are issued by PGIM Limited and/or PGIM Netherlands B.V. to persons who are professional clients as defined under the rules of the FCA and/or to persons who are professional clients as defined in the relevant local implementation of Directive 2014/65/EU (MiFID II). In Italy, information is provided by PGIM Limited authorized to operate in Italy by Commissione Nazionale per le Società e la Borsa (CONSOB). 

In Japan, information is provided by PGIM Japan Co., Ltd. (“PGIM Japan”) and/or PGIM Real Estate (Japan) Ltd. (“PGIMREJ”).  PGIM Japan, a registered Financial Instruments Business Operator with the Financial Services Agency of Japan offers various investment management services in Japan.  PGIMREJ is a Japanese real estate asset manager that is registered with the Kanto Local Finance Bureau of Japan.

In Hong Kong, information is provided by PGIM (Hong Kong) Limited, a regulated entity with the Securities & Futures Commission in Hong Kong to professional investors as defined in Section 1 of Part 1 of Schedule 1 of the Securities and Futures Ordinance (Cap. 571). In Singapore, information is issued by PGIM (Singapore) Pte. Ltd. (“PGIM Singapore”), a regulated entity with the Monetary Authority of Singapore under a Capital Markets Services License to conduct fund management and an exempt financial adviser. This material is issued by PGIM Singapore for the general information of “institutional investors” pursuant to Section 304 of the Securities and Futures Act 2001 of Singapore (the “SFA”) and “accredited investors” and other relevant persons in accordance with the conditions specified in Section 305 of the SFA. In South Korea, information is issued by PGIM, Inc., which is licensed to provide discretionary investment management services directly to South Korean qualified institutional investors on a cross-border basis.   

Prudential Financial, Inc. (“PFI”) of the United States is not affiliated in any manner with Prudential plc, incorporated in the United Kingdom or with Prudential Assurance Company, a subsidiary of M&G plc, incorporated in the United Kingdom. 

You are viewing this page in preview mode.

Edit Page