In an unexpected twist that leaves behind its ever-conservative approach to investing, Capital Group — a mutual fund giant that has existed for 94 years — has transformed an investment of $1 billion into $6 billion. And while it sounds as if the gain was realized from a tech startup or a timeless stock, in reality the gain is based on a calculated and somewhat contrarian bet on companies with large amounts of Bitcoin on their balance sheets. This is a financial success, but it is more than that; it signifies a changing world where a digital commodity is finding its way into even the most traditional of investment conversations.
A Pioneer with a Traditional Approach
The creator of this strategy is Mark Casey, a seasoned portfolio manager who has spent 25 years at Capital Group. Casey has never hidden his admiration for legendary investors, like Benjamin Graham and Warren Buffett, and has now taken on a prominent proponent of Bitcoin. Supposedly, he called Bitcoin “one of the coolest things that has ever been created by people.” Casey’s comments are especially remarkable coming from a firm like Capital Group, which is already known for being conservative and employing a long-term investment strategy. Casey and the rest of his team considered Bitcoin not as a fleeting digital currency, but as a very long-duration asset similar to a commodity like gold or oil.
The Strategy: Investing in Bitcoin “Treasury” Companies
Capital Group did not hold exposure to Bitcoin by owning Bitcoin itself but instead holding positions in public companies that have made Bitcoin a primary treasury reserve asset. This allowed Capital Group to capture Bitcoin price moves while observing procedures of the public markets. It is an interesting way to gain exposure to a growing digital asset without having to navigate the foreign and whacky world of crypto wallets and exchanges.
The MicroStrategy Blueprint
At the center of Capital Group’s Bitcoin bet is its stake in Strategy, the software company that has been dubbed by its founder, Michael Saylor, as the Bitcoin accumulation vehicle. In 2021, Capital Group invested over $500 million for 12.3% of the company. While that initial stake is now slightly diluted to 7.89%, it has grown to a value of roughly $6.2 billion due to the rise in Strategy’s stock price. Saylor’s steadfast approach to Bitcoin has turned his company into the premier corporate owner of the asset, and in turn has created a new opportunity for institutional investors.
The Rise of Corporate Bitcoin Adoption
The success of Capital Group is not an isolated one. More and more we are witnessing companies adopt Bitcoin as an asset. Data from BitcoinTreasuries.NET shows that once one of the largest, fledgling corporate acquisitions of Bitcoin, corporations collectively have over 1 million BTC worth over $117B. This list is dominated by Strategy but also features hotel operator Metaplanet (Japan) and mining company Mara Holdings, both of which are equally part of Capital Group. The emergence of so-called “Bitcoin treasury” companies represents a paradigm shift in corporate finance as companies are increasingly looking to Bitcoin as a store of value and inflation hedge. Semler Scientific, for example, has outlined bold accumulation targets to the public markets. This trend is unlikely to stop.
A New Chapter for Traditional Finance
We have reached an important turning point for traditional finance and digital assets in a way that even the oldest and traditionally most conservative institutions are not only engaging with, but innovating on, this new asset class. Going from cautious to confident multibillion dollar posture demonstrates the shift away from the fringe view of Bitcoin narrative and into a legitimate asset class that has a place in a diversified portfolio. As other companies move out in front of Strategy and Metaplanet, the landscape of corporate finance as we know it will fundamentally change.
