Bitcoin Boosts Stodgy Equity Mutual Funds with 100% Surge Over Past Year.

Bitcoin's surge over the past year has boosted returns for some stodgy equity mutual funds, with seven out of ten funds invested in Bitcoin beating their benchmarks by an average of 22 percentage points. The Kinetics Internet Fund, which has half of its assets allotted to two Grayscale Bitcoin ETFs, trounced its benchmark by 23 percentage points, with the token-linked products responsible for most of its total return. Bitcoin's high-risk, high-reward profile has made it an attractive tool for equity mutual-fund managers looking to increase performance.

Bitcoin's remarkable surge over the past year has provided an unexpected boost to some traditionally conservative equity mutual funds. Seven out of ten funds invested in Bitcoin via exchange-traded funds (ETFs) have outperformed their benchmarks by an average of 22 percentage points in the 12-month period through July 2025 [1]. This performance highlights Bitcoin's potential as a high-risk, high-reward tool for equity mutual-fund managers seeking to enhance their portfolios.

One notable example is the Kinetics Internet Fund (ticker WWWFX), which has approximately half of its $348 million in assets allocated to two Grayscale Bitcoin ETFs. This fund trounced its benchmark, the S&P 500 Index, by 23 percentage points over the same period, with the token-linked products contributing significantly to its total return [1].

The crypto industry's reputation for illicit activity has historically been a barrier to wider acceptance, but Bitcoin's consistent gains, even through significant drawdowns, have become too compelling to ignore. The regulatory landscape has improved, with major financial institutions like Citigroup Inc. and JPMorgan Chase & Co. exploring tokenized deposits and stablecoins [1].

The ability to incorporate Bitcoin-linked assets has become particularly relevant as active mutual funds continue to face significant outflows. Over $280 billion has exited active equity mutual funds this year alone, bringing total outflows since 2020 to a staggering $2.3 trillion [1]. An analysis by Bitwise suggests that a 60/40 portfolio with a 5% Bitcoin allocation would have outperformed the traditional strategy by more than 200% over the past decade [1].

Meanwhile, crypto-focused ETFs have drawn in around $75 billion since the start of last year, with spot-Bitcoin ETFs being particularly popular. Patient Capital, a $2.2 billion investment manager, has held a position in one such ETF, Fidelity’s FBTC, since late last year [1].

However, mutual funds face specific limitations that can hinder their ability to invest in cryptocurrencies. Patient Capital, for instance, had to overcome "constraints" to invest in Fidelity’s Bitcoin ETF, highlighting the need for funds to have flexible prospectuses [1]. Only three out of the ten funds that own Bitcoin ETFs have seen inflows so far this year, indicating that convincing investors of the value of higher fees may be challenging [1].

While Bitcoin's potential to boost returns is clear, its volatile nature remains a significant risk. Fund managers must carefully consider the balance between risk and reward when incorporating cryptocurrencies into their portfolios.

References:
[1] https://www.bloomberg.com/news/articles/2025-08-11/booming-bitcoin-muscles-into-an-old-school-investment-club