Vanguard retirement exec says crypto 401(k) offerings are 'very premature'
While BlackRock, Fidelity Investments and a handful of other asset management firms are racing to get their applications for a spot bitcoin exchange-traded fund approved, not every asset manager is buying into the crypto craze.
Vanguard Group — the world's second-largest asset manager, with $7.25 trillion in assets under management as of March 31 — has so far stayed out of the scrum. And Vanguard will likely continue to avoid the asset class in the foreseeable future, said Dave Stinnett, the firm's head of strategic retirement consulting.
In an interview, Stinnett said Vanguard believes putting a cryptocurrency fund option into a 401(k) lineup would be "very premature."
Vanguard's caution toward crypto stands in contrast with some of its competitors — including Fidelity, which already allows certain 401(k) customers the option of investing up to 20% of their portfolios in bitcoin.
Meanwhile, the ongoing spot bitcoin ETF race — if it results in one or more approvals from the Securities and Exchange Commission — would also make it easier for investors to hold crypto in their portfolios.
Stinnett said new products must meet four requirements before being made available to Vanguard's customers:
- They must have "enduring investment merit."
- The product must fulfill the long-term needs of its targeted clients.
- Vanguard must be able to deliver a compelling advantage over its competitors — "if we can't, what's the point?" Stinnett said.
- It must be feasible to launch the product in the current regulatory environment.
By Vanguard's measure, crypto products fail to meet all of these requirements.
"With respect to cryptocurrency, when you look at those four things, we would say we're not ready to convince ourselves that this is a priority on our product pipeline," Stinnett said.
Vanguard has an informal fifth requirement for new products, which crypto products are also not meeting, he said: interest from institutional clients.
Of Vanguard's 1,700 institutional clients, which together represent over 5 million retirement plan participants, interest in crypto has been "very, very mild," Stinnett said.
"When it comes up, you could characterize it more as curiosity than kind of a hard interest," he said. "We're always very in tune to what our clients want and what their preferences are, and that [interest] hasn't been there."
From Pensions & Investments, a sibling publication of Crain Currency