The State of Wisconsin Investment Board's (SWIB) investment into spot bitcoin exchange-traded funds (ETFs) earlier this year is likely just a trial phase, according to David Krause, a professor of finance at Milwaukee-based Marquette University. Krause stated that the board has always been innovative and it's no surprise that it's experimenting with bitcoin.

In the first quarter, the SWIB added two spot bitcoin ETFs to the portfolio of Wisconsin's pension plan. The board purchased shares of BlackRock’s iShares Bitcoin Trust (IBIT) and Grayscale’s Bitcoin Trust (GBTC) valued at $164 million as of March 31, as revealed in a filing with the U.S. Securities and Exchange Commission in May. This move surprised the industry as big institutions, particularly pensions, don't usually invest in young ETFs like the spot bitcoin ETFs.

However, Krause noted that the state's investment board has been ahead of the game before. Krause further explained that the SWIB is a fully funded pension fund, which gives it the luxury of being able to invest for the long term without worrying as much about liquidity. As of the end of 2023, the SWIB managed roughly $156 billion in assets, meaning its holdings in the bitcoin ETFs were a negligible roughly 0.1% of its portfolio.

Krause believes that the investment was just a "toe in the water" and he expects the SWIB to add to that amount and for other pensions to eventually follow suit. He said, 'I think it’s just an entry point. I think they’re testing to see the reaction of the public to whether or not there’s resistance to owning this and they’re using it as a trial run, because it really is not going to impact the portfolio substantially, until you get to maybe a 1% or 2% positioning.'

In the first three months of the year, nearly 500 institutional investors revealed allocations into the spot bitcoin ETFs. The biggest owner as of March 31 was hedge fund Millennium Management, which revealed $2 billion in holdings across a number of the funds, or roughly 3% of its total assets under management.