Proposed Kansas Bill Would Authorize KPERS Allocation to Bitcoin ETFs

Senate Bill No. 34 would permit the $27.3 billion Kansas Public Employees Retirement System to invest up to 10% of its portfolio in digital asset exchange-traded funds issued by a Kansas-registered company.

A bill introduced in the Kansas legislature would allow the Kansas Public Employees Retirement System to allocate up to 10% of its portfolio to bitcoin exchange-traded products.

Senate Bill No. 34., which calls for “authorizing the board of trustees to invest up to 10% of the moneys of the Kansas public employees retirement fund in bitcoin exchange-traded products,” was introduced in the Kansas Senate on January 16 and was referred to the Committee on Financial Institutions and Insurance the next day.

The bill, introduced by Kansas Senator Craig Bowser, a Republican, would permit the board of the pension fund to invest and reinvest assets in bitcoin exchange-traded funds if the ETFs are “issued by an investment company registered in Kansas.”

While the Securities and Exchange Commission has approved a handful of bitcoin ETFs, nearly all are organized as Delaware statutory trusts. Few firms based in Kansas sponsor ETFs; Tortoise Capital, based in Leawood, sponsors a handful of ETFs, all formed under Delaware law.

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As of June 30, 2024, KPERS had $27.3 billion in assets under management. As of 2023, the system had a funding ratio of 73%, with $9.63 billion in unfunded liabilities. KPERS allocates 23% of its portfolio to U.S. equities, 18% to international equities, 13% to real return assets, 12% to core fixed income, 11% to both private equity and real estate, 8% to yield driven assets and 3% to cash equivalents, according to the fund’s investment reports.

Only a handful of pension funds have purchased bitcoin or bitcoin ETFs, but among those that have, their allocations are small. An unnamed pension fund in the U.K. recently made a 3% allocation. A white paper from BlackRock states that the optimal allocation for a bitcoin ETF in a portfolio is 1% to 2%.

Other funds that have purchased such ETFs include Australia’s AMP Super (0.05% allocation), the Michigan Retirement System (0.0065% allocation). The State of Wisconsin Investment Board purchased more than $160 million of digital asset ETFs in May.