Fortress Investment Group LLC’s Michael Novogratz said he put some personal money into Bitcoin and his firm has been evaluating the virtual money that exists only in digital form.
Novogratz, who didn’t specify how much he invested, said he sees Bitcoin growing as a payment system, especially in developing nations. He has not invested in Bitcoin on behalf of Fortress, which managed $54.6 billion as of June 30.
“I have a nice little Bitcoin position,” Novogratz, principal and co-chief investment officer of macro funds at Fortress, said at a conference held today in New York by UBS AG’s chief investment office. “Enough that I’m smiling that it doubled.”
Bitcoin has attracted regulatory scrutiny this year for being used in the purchase and sale of narcotics and other illicit goods. Half-a-dozen venture-capital firms have put their money on the currency and related services, Bloomberg Markets magazine reported this month. They include Founders Fund, started by PayPal Inc. founders Peter Thiel, Ken Howery and Luke Nosek, and the Winklevoss twins, who sued Facebook Inc. founder Mark Zuckerberg claiming he stole their idea for the social-networking site.
The virtual currency originated at the height of the financial crisis in November 2008. Bitcoins are created, or “mined,” by computers that solve difficult cryptographic problems to verify transactions. As more Bitcoins are created, the problems become more difficult. Pioneers could mine coins on their laptops. Now, high-powered computer equipment is needed.
“Put a little money in Bitcoin,” Novogratz said. “Come back in a few years and it’s going to be worth a lot.”
Bitcoin, known for its wild price swings, traded as low at $175.30 today and as high as $233.40, according to Mt. Gox, an exchange for the digital currency.
Novogratz said he’s also bullish on the stock markets and sees the Standard & Poor’s 500 Index of U.S. equities rising to about 1,850 by year-end. His optimism is driven in part by a belief that the Federal Reserve won’t start the process of unwinding its unprecedented stimulus this year, he said.
Novogratz is less optimistic about emerging-market stocks, which he said will trail over the next three to five years as investors see corruption in countries such as China, bureaucracy in India and troubles in Brazil. The S&P 500 index advanced 22 percent through yesterday, compared with a 2.1 percent decline for the MSCI Emerging Markets Index.
“A lot of the juice of why you were investing in emerging markets went away,” he said.