Lots of Russians want to invest in bitcoin but we believe it's a bubble, wealth fund chief says

  • "Frankly, we will never invest ever in cryptocurrencies ... For us it's very clear that bitcoin is a bubble," Kirill Dmitriev, chief executive of Russia's sovereign wealth fund, RDIF, told CNBC.
  • "Frankly, in Russia lots of people want to invest in bitcoin but we believe it's a bubble, while blockchain technology will definitely be relevant," he said.

A panel of fund managers have given their tips on where to find pockets of value in the market — and what assets investors should avoid.

The cryptocurrency bitcoin soon popped up in the discussion.

"Frankly, we will never invest ever in cryptocurrencies ... For us it's very clear that bitcoin is a bubble," Kirill Dmitriev, chief executive of Russia's sovereign wealth fund, RDIF, told CNBC at the World Economic Forum (WEF) in Davos, Switzerland on Tuesday.

"Frankly, in Russia lots of people want to invest in bitcoin but we believe it's a bubble, while blockchain technology will definitely be relevant," he said, adding that RDIF was looking at a couple of infrastructure investments that facilitate blockchain transactions but had not made a decision yet.

Dmitriev added that he supported investments in technology — but not cryptocurrencies in themselves.

"Definitely the technology sector is (an interesting sector for investment) and we see that technology — not only cryptocurrencies and blockchain which, frankly, I think there is too much time spent discussing those items — but technology like online health care or technology as big data for agriculture, technologies that can be applied to big companies and create lots of value," he said.

"We need to be much more aggressive and active than before. Previously, the sovereign wealth funds just outsourced decision-making and just collected the checks but for us we need to be much more active searching for this value and I believe technology and infrastructure are areas to focus on right now."

Kirill Dmitriev, chief executive officer of Russian Direct Investment Fund (RDIF).
Scott Eelis | Bloomberg | Getty Images
Kirill Dmitriev, chief executive officer of Russian Direct Investment Fund (RDIF).

Pockets of value

Sovereign wealth funds are state-owned investment vehicles that enable countries to save surplus revenues and invest in a variety of assets on behalf of a nation.

As of September 2017, sovereign wealth funds around the world had amassed $7.4 trillion in assets under management, according to the Sovereign Wealth Fund Institute (SWFI), up from $3.4 trillion almost a decade ago.

Funds invest in a range of financial assets, from stocks and bonds to real estate and precious metals, but all have an objective to maximize the long term return from their investments.

If any investment vehicle is going to work hard looking for "pockets of value" it's going to be sovereign wealth funds and their chief executives who have the task of investing the surplus wealth of their respective nations into various asset classes.

RDIF's Dmitriev also said that it was a challenge to find value, however.

"Because we live in a world where valuations are so high, it's really hard to find pockets of value," he said.

"Professor Robert Shiller mentioned (to CNBC) today that there might be a crisis in waiting but nobody knows when it will happen, but we see very high valuations in public markets, we see very high real estate valuations and that is a big question — (where) do nations put their money where additional value can be created."

Azman Mokhtar, managing director of the Khazanah Nasional Berhad, the strategic investment fund of the Government of Malaysia that manages around $40 billion of assets, also told CNBC that technology was a key investment strategy for his fund.

"We are grateful that we are in a region that is very embedded in growth. China is still six-plus percent (gross domestic product growth) and India is growing at seven-plus percent and ASEAN (Southeast Asia) is still growing 4 to 5 percent (per year)," he said.

"Many boats rise if the tide rises and it's basically a matter to find the key business models and we've found it in certain thematics such as consumption — when you have a young population in these countries — and health care, banking."