Morgan Stanley, one of the largest investment banks in the U.S., has increased its Bitcoin exposure to over $300 million by purchasing additional shares of the Grayscale Bitcoin Trust () for three of its funds during the third quarter.
In an SEC filing this week, the Morgan Stanley Institutional Fund’s Growth Portfolio reported holding 3,642,118 shares of GBTC at the end of Q3, compared to 2,130,153 at the end of Q2, an increase of 71%.
The Grayscale Bitcoin Trust is a financial vehicle that enables investors to trade shares in trusts holding large pools of. This way, investors get exposure to the world’s largest cryptocurrency without the need to purchase and hold the actual underlying asset.
In new SEC filings, Morgan Stanley has disclosed a dramatic increase in Bitcoin exposure in its asset management business.
Earlier this year, Morgan reported buying Grayscale BTC in a large number of investment funds. For the three funds with the largest Grayscale holdings...
— MacroScope (@MacroScope17) November 24, 2021
The firm’s next-largest purchase of GBTC shares in Q3 was made through the Morgan Stanley Insight Fund (CPODX), growing its holdings by 63% to 1,520,549 GBTC shares at the end of Q3, according to a separate document. The fund had 928,051 shares of GBTC in the previous quarter.
In the same period, the Morgan Stanley Global Opportunity Portfolio increased its GBTC holdings from 919,805 to 1,463,714 shares, an increase of 59% in Q3.
The total amount of GBTC shares held across the three funds has thus reached 6,626,381, worth roughly $307 million in current prices.
The price of GBTC is $46.42 at the time of writing.
GBTC’s continued discount
Managed by New York-based Grayscale Investments, GBTC, has been trading at a significant discount since February, meaning that the price of the shares is lower than the current value of the Bitcoin they represent.
According to data from YCharts, the current GBTC discount is -12.32%.
As of October 29, the value of Bitcoin has increased by 95% since the start of the year, however, one of the industry’s largest Bitcoin-focused funds returned only 42% over the same period, a recent research note by Morningstar said.
Last month, Digital Currency Group, Grayscale’s parent company, signaled that it may repurchase a certain amount of GBTC shares after upping its purchase authorization from the previous $750 million to $1 billion.
This could offer a temporary fix to the discount issue, as it would narrow the discount between the market price of GBTC shares and their net asset value (NAV).
In the long term, however, Grayscale is eyeing the conversion of its flagship product into a Bitcoin ETF—an exchange-traded fund backed by physical Bitcoin.
The investment firm filed a formal application for the conversion in October, but the wait can drag on as the U.S. Securities and Exchange Commission is yet to greenlight any such product.
Nevertheless, as Morgan Stanley’s latest addition of GBTC shares shows, Grayscale’s product—despite lower returns compared to the physical Bitcoin—is still an attractive option for investors.
The Wall Street giant first revealed its exposure to Bitcoin through GBTC in Q1 when it purchased over 28,000 shares in the trust worth $1.325 million.