South African asset manager Sygnia Ltd. is urging caution after its newly launched Bitcoin ETF attracted a surge of interest from local investors.
Key Takeaways:
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Sygnia advises investors to limit crypto exposure to no more than 5% of their portfolio.
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The firm’s CEO warns that Bitcoin’s volatility poses a serious risk, especially in emerging markets like South Africa.
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Despite strong inflows, Sygnia actively contacts clients to discourage full portfolio switches into its Bitcoin ETF.
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The company, which introduced the Sygnia Life Bitcoin Plus fund in June, says it actively discourages clients from shifting all their assets into the high-risk crypto product.
“We actually intervene with a view of stopping the investor from doing something silly by switching,” said Magda Wierzycka, CEO of Sygnia, during an interview with Bloomberg TV.
Wierzycka emphasized that cryptocurrencies should only make up a small portion of a broader investment strategy, recommending no more than 5% of discretionary or annuity assets be allocated to crypto funds.
The Sygnia Bitcoin Plus fund uses the iShares Bitcoin Trust ETF as its benchmark.
While Bitcoin has soared 82% in the past 12 months, it remains volatile, dropping 2.3% to $112,735.12 at mid-morning in Johannesburg on Monday.
Although its historical volatility has eased from over 200% a decade ago to around 40%, the risk remains substantial, especially in an emerging market like South Africa.
Wierzycka noted that the extreme volatility could wipe out life savings in a country where per capita GDP is just $15,990, far below developed economies.
“The underlying asset is highly volatile,” she warned. “You need to be very sure about the messaging around it and you need to be sure that you don’t make promises that you can’t meet.”
While previously skeptical of Bitcoin, Wierzycka now sees the asset as a legitimate long-term play rather than just a speculative bet.
Sygnia has plans to launch additional crypto ETFs on the Johannesburg Stock Exchange, pending regulatory approval. A prior attempt was blocked by authorities.
The Cape Town-based firm manages around 350 billion rand ($20 billion) in assets. Its Bitcoin Plus fund has seen “very, very significant” inflows, according to Wierzycka, though exact figures were not disclosed.
She confirmed that the firm calls investors who appear to be switching large sums into the crypto fund to caution them personally.
Bitcoin exchange-traded products now hold over 1.47 million BTC, representing around 7% of the total supply, with U.S.-based ETFs dominating the landscape.
