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While most fund managers are cautious in recommending crypto to their clients due to volatility concerns, Horizon Kinetics is now telling investors to invest in real estate and crypto assets to protect themselves against inflation and other challenges to the global economy.
Horizon’s co-founder Peter Doyle said that growing debt and the coronavirus pandemic will inevitably push the global economy to an infection point. “There is no turning back after the pandemic and globally there is a debt problem and it means either default or currency debasement,” Doyle told the Financial Times.
The past decade has seen a rapid rise in debt levels, which is now accelerated by governments’ fiscal responses to the pandemic. This has caused investors to reevaluate their portfolios to make them more inflation-proof by investing in a mix of assets including real estate, cryptocurrencies, commodities, and quality companies.
For Horizon, cryptocurrency is one of the best bets in beating inflation. “People should have exposure to the asset class,” Doyle said. He pointed out that Bitcoin’s supply cap has a scarcity premium amidst concerns about the devaluation of fiat currencies.
The firm is known for its long-term buy-and-hold approach in its real estate investments. For instance, it continues to own a massive holding in Texas Pacific Land, which it purchased when the asset manager started in 1994.”The best long-term investors tend to have concentrated portfolios and low turnover in holdings as they let the companies they own grow and compound returns,” Doyle explained.
The investment firm seems to be applying the same approach when it comes to Bitcoin. In 2016, its Paradigm fund made a 1 percent allocation in Grayscale Bitcoin Trust, which has risen to the current 10 percent of the fund’s portfolio.
Three of Horizon Horizon Kinetics’s funds made it to the top-10 performing active equity funds of 2021 so far. These are the Kinetics Small Cap (ranked second with YTD returns of 58.74%), Kinetics Spin-Off and Corporate Restructuring (ranked third with YTD returns of 56.58%), and Kinetics Paradigm (ranked eighth with YTD returns of 47.71%).
“We are not for everyone and we seek investors with a three to five-year time horizon in our funds,” Doyle emphasized his firm’s long-term approach. “Our investment philosophy is owning companies that are managed with a long-term focus and we want investors to think the same way.”
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