Category: Insights

Executive Summary

• Economic uncertainty has resulted in an extremely strong year for gold, with the precious metal rallying ~30% as of early September
• As investors look for safe havens, a discussion has emerged about whether cryptocurrency—specifically bitcoin—could become “the new gold”
• While bitcoin has not yet achieved the safe-haven status gold enjoys, with time and continued acceptance, it could come to serve a similar role in financial markets
• There are several similarities between bitcoin and gold, including their scarcity and their role as stores of value. Despite the similarities, however, bitcoin lacks the legitimacy of gold’s 5,000-year history
• TIFF is cautiously optimistic about crypto’s future and has made small investments to capitalize on innovation in the space

So far, 2025 has been a year of uncertainty. Investors wait anxiously on news of potential tariffs, geopolitical risk remains elevated, and the market swings with each new announcement. It is not surprising, then, that investors are seeking safe havens such as gold. Gold has had a phenomenal year, returning over 30% as of early September. The last time gold saw gains of this magnitude was 15 years ago in 20101. Unlike 2010, however, investors are starting to see another potential safe haven to weather turbulent markets: cryptocurrencies.

It’s important to take a brief step back. Saying that cryptocurrency could be a safe-haven asset is too broad a statement. The crypto universe is incredibly diverse, with different cryptos serving distinct purposes and deriving value in different ways. For example, a stablecoin is different than a utility token. To be more specific, let’s focus primarily on bitcoin. Originally designed to function much like a currency, bitcoin is now the most widely accepted crypto asset, accounting for more than 55% of the total crypto market cap2. Given its primary use case as a store of value and its dominance in the market, we will focus the remainder of this paper on the comparison between gold and bitcoin.

Many have speculated whether bitcoin is or will become the new gold, gradually overtaking the precious metal as the premier safe haven. While it has not yet achieved the safe-haven status that gold enjoys, with time and continued acceptance, bitcoin could come to serve a similar role in financial markets.

Two Sides of the Same Coin

Why has the comparison between these assets been drawn? While there are notable differences between the two, gold and bitcoin share several similarities, beginning with scarcity.

Gold is unique among many major commodities in that it is not typically consumed. While it can be used in items like batteries, producers often substitute other metals due to gold’s high cost. Its supply also grows very slowly. A report from Goldman Sachs states that “new annual production adds just over 1% to the existing stock and is stable and price inelastic.”3 As a result, when demand grows, it is difficult (if not impossible) to quickly increase supply, as producers might with oil, to meet the increase in demand. This constraint ultimately helps drive up gold’s value.

Bitcoin is similar. It has a fixed supply, with the final bitcoin projected to be mined by 2140. In fact, bitcoin’s scarcity is now even greater than gold’s, as measured by its stock-to-flow ratio (the existing supply relative to annual production). In April 2024, bitcoin surpassed gold as the asset with the highest stock-to-flow ratio among liquid and easily tradable assets4.

One of the most important similarities is that both gold and bitcoin function as stores of value, meaning they are expected to preserve their worth over time. This quality is especially important for any asset to be considered a safe-haven. Investors seek assets they believe will protect their wealth during times of uncertainty. Gold acquired this characteristic because it was discovered to be both scarce and durable. Bitcoin, by contrast, was deliberately created as a store of value. Ultimately, however, both rely on shared trust to sustain their worth.

The Test of Time

It is in this need for “buy-in” and belief that we begin to see the key difference between bitcoin and gold. Gold has been considered a source of wealth for 5,000 years. The U.S. once operated under a literal “gold standard,” and even though that ended more than 50 years ago, the term still signifies the highest level of quality. There is no dispute that gold is valuable and will continue to be into the future. Bitcoin, by contrast, lacks that legacy.

This difference is reflected in the respective volatility of the two assets. Gold has a long-term volatility of approximately 15%. Bitcoin’s volatility, meanwhile, has decreased as it has gained greater legitimacy, but over the past five years it has still averaged approximately 40%—more than twice that of public equities. That level of volatility is hardly consistent with what one would expect from an asset used predominantly as a safe haven!

The good news for bitcoin is that it shouldn’t take 5,000 years for it to achieve the same level of legitimacy as gold. Adoption of new technologies and innovations occurs far more quickly now than in the past. As the number of bitcoin investors continues to grow, and if regulation remains favorable, bitcoin may begin to behave more like gold.

There are risks, however, that could change bitcoin’s trajectory. One of the most prominent is the advancement of quantum computing. This poses a significant risk to any digital technology that relies on the difficulty of prime number factorization. In theory, quantum computers can factor huge numbers exponentially faster than classical computers, which could render bitcoin’s mining methods obsolete.

Bitcoin miners and developers are aware of these risks, and upgrades could be implemented to mitigate quantum threats. Another risk is the possibility that a different store-of-value cryptocurrency could eventually supplant bitcoin. As the first cryptocurrency, bitcoin certainly holds a significant edge, but technological advances, regulatory shifts, or investor sentiment could change that.

Positioned for Possibility

Uncertainty notwithstanding, there may be growing validity in the idea that bitcoin is the new gold”—or that it could be in the future. The similarities between gold and bitcoin are evident. What bitcoin still lacks is the confidence in its value that gold has earned over centuries. With time, however, that confidence could still come.

In the interim, we at TIFF still believe it is prudent to have at least a small exposure to crypto in our portfolios. We do this through limited allocations to a relative value crypto strategy, a broad-based liquid crypto index fund, and a crypto-oriented VC strategy. Though the position is small, we believe meaningful innovation will emerge from the crypto ecosystem that ultimately drives genuine value. While we may not yet know what form that value will take, we are confident that when the opportunity becomes clear, we will be well positioned to capture it.

If you have a question about cryptocurrency, gold, or how TIFF can help you manage your portfolio through uncertain times more broadly, please do not hesitate to reach out.

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute an offer or advertisement of TIFF’s investment advisory services or investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

These materials may contain forward-looking statements relating to future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other comparable terminology. Although TIFF believes the expectations reflected in the forward-looking statements are reasonable, future results cannot be guaranteed.

Executive Summary

• The hedge fund industry is no stranger to AI, but recent advancements have improved the way hedge funds invest.
• Data is a key competitive advantage for hedge funds leveraging AI. However, investors should understand how that data is sourced, processed, and interpreted.
• Key impediments to broader AI adoption include the high cost of computing power and difficulty attracting top-tier talent.
• Despite AI’s growing role, human judgment remains a critical component of investment decision-making.

Introduction

Leopold Aschenbrenner, a 23-year-old former OpenAI engineer and founder of the $1.5 billion hedge fund Situational Awareness, wrote recently that “Everyone is talking about AI, but few have the faintest glimmer of what is about to hit them.”1

For an industry that hires some of the smartest people in the world and prides itself on innovative investment approaches, how vulnerable is the hedge fund industry to an AI invasion?

In reality, hedge funds have been incorporating forms of AI for decades. Large systematic (quantitative) funds have existed since the 1980s. Even more recent funds like Numerai, which relies on public tournaments to crowdsource quantitative trading signals, have been around for over a decade.2

Let’s explore how hedge funds are deploying AI today, along with the challenges that still exist.

Data and Delusion

Put simply, AI models take large amounts of data and aim to predict the future of market movements based on this data (Figure 1). Yet we often hear the question: “Isn’t data just data? Can’t everyone just buy the same data?”

Not so. In practice, we have found that access to proprietary, well-structured data has become one of the key differentiators in determining which hedge funds have an edge in the AI race.

Systematic funds represent some of the earliest and most prominent adopters of AI in the hedge fund industry. They utilize vast quantities of data to identify patterns and generate predictive signals. Investors often assume these funds have pristine data and can forecast with precision. In reality, many predictions are based on small tidbits of information. The process can sometimes be like trying to guess a picture of a dog when all you are given is 5 pixels. Many systematic funds operate with hit rates slightly over 50%, but small gains with enough repetition can lead to large gains. Unsurprisingly, systematic funds have invested heavily in their data capabilities in recent years.

Ben Wellington from Two Sigma highlighted this point on a recent podcast, emphasizing the importance of being present at the moment data is created to ensure proper categorization.4 In this podcast, he shared an example from the post-financial crisis era: after 2008, a major newspaper retroactively labeled articles from 2006 and 2007 as “subprime.” A researcher relying only on these labels might mistakenly conclude that the sudden rise in “subprime” mentions was a powerful predictive signal. In reality, it reflected backfill bias—a postmortem reclassification rather than a true early warning.

One area within hedge funds where data aggregation has shown its worth is in the event-driven space. Long-tenured Equity Capital Markets (ECM) funds investing in deals such as IPOs, M&A, and issuances have been able to accumulate a treasure trove of data on past transactions, which in turn helps make surprisingly accurate predictions about outcomes of future events.

For example, by identifying situations that are likely to lead to a deal break, an M&A fund could limit its exposure to left-tail events, thereby enhancing its overall return profile of the fund.

Moving forward, we believe those funds with the deepest, richest, and most proprietary data will retain a significant edge. More recent entrants will need to demonstrate more creativity in how they use available data to leapfrog incumbents.

Talent and Technology

Nvidia’s staggering ~1,200% performance5 over the past five years has demonstrated the importance of computing power to AI development. More processing power means faster hypothesis testing and portfolio optimization which may lead to faster and better signal development. For systematic funds, this could translate directly into alpha. The downside is that processing power is expensive and difficult to scale. Leasing costs for data centers for a large systematic fund can run into hundreds of millions of dollars per year, thus limiting the amount of AI a smaller hedge fund can realistically deploy.

More important than processing costs is the ability to attract talent. It is often said that 20% of researchers generate 80% of the successful signals in a given year, though the challenge is that no one knows in advance which 20%. For this reason, it is important to keep a wide cast of highly talented (and highly paid) staff on the payroll. Hedge funds are competing with technology firms for top AI talent, with pay packages now exceeding $1 million per year.  What’s more, each AI developer needs to have a supporting cast of data engineers and developers to help turn theory into reality.

That said, we have seen increasing success rate among more entrepreneurial managers who strike out on their own with assistance from AI, particularly those focused on a specific niche.

Judgement and Justification

For all of AI’s capabilities, there remain areas of investing where human judgment is difficult to replicate. Manager discretion is one of the most significant. Fundamental strategies retain an edge in situations where decision-making depends on conviction, contrarian thinking, or nuanced human interactions. For example, when a portfolio manager chooses to concentrate on a handful of high-conviction positions, or makes a contrarian trade based on direct engagement with company management, the driver is individual judgment rather than an algorithmic signal.

Management meetings underscore this distinction. Whether investors are receptively learning or seeking to influence outcomes through activism, these activities remain firmly in the fundamental toolkit, not the quantitative one. Human relationships and qualitative assessments are central to investment due diligence, and AI has not yet shown an ability to replicate these dynamics. Many of the top-performing fundamental hedge funds demonstrate a proclivity to execute judgment calls that may rest on nothing more than pattern recognition honed over years of experience in a particular market segment.

This is not to say AI cannot aid the traditional investment process. We often find that today’s fundamental investors are using AI to help them summarize information and build a baseline understanding. Tools capable of reading decades of company filings in minutes, updating financial models post earnings in seconds, and distilling real-time company news into bullet points have given these managers much greater efficiency in their decision-making.

Conclusion

We remain optimistic about AI’s potential and believe it will continue to reshape the landscape of the hedge fund industry. However, managers should be cautious not to rely so heavily on AI that they lose their judgment.

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute an offer or advertisement of TIFF’s investment advisory services or investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

These materials may contain forward-looking statements relating to future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other comparable terminology. Although TIFF believes the expectations reflected in the forward-looking statements are reasonable, future results cannot be guaranteed.

TIFF Investment Management is proud to share that Jessica Portis, CFA, Chief Client Officer, has been recognized by Pensions & Investments as one of the 2025 Influential Women in Institutional Investing. This award celebrates the innovative leaders making an impact on the investment industry. Jessica is one of the key forces delivering exceptional service to TIFF clients, and her vision, expertise, and dedication have made her a true leader in the field.

As part of this honor, Jessica is featured in Pensions & Investments’ September 8th Special Report, highlighting women who are driving progress in the industry. Read more here ➝

Jessica also joined a select group of honorees at the Nasdaq Opening Bell Ceremony on September 8th at the MarketSite in Times Square, where a special tower display celebrates this year’s awardees.

Later this month, she will be honored at the Pensions & Investments Conference and Awards Dinner on September 18th in Chicago, IL.

We are thrilled to see Jessica’s contributions recognized on such a prominent stage—congratulations, Jessica!

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute an offer or advertisement of TIFF’s investment advisory services or investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

These materials may contain forward-looking statements relating to future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other comparable terminology. Although TIFF believes the expectations reflected in the forward-looking statements are reasonable, future results cannot be guaranteed.

Kane Brenan, CEO, and Anne Duggan, Managing Director, Client CIO Group, at TIFF Investment Management, join host Bill Kelly on the Educational Alpha podcast for a comprehensive conversation about TIFF’s mission, investment philosophy, and role in today’s evolving market landscape.

The conversation explores:
• TIFF’s origin story and 30+ year mission of delivering institutional-quality investment management to endowments and foundations.
• How TIFF continues to evolve—expanding from small institutions to larger, more complex organizations requiring customized portfolios.
• The firm’s access to what it believes to be top-tier private equity and hedge fund managers, driven by its longstanding industry relationships.
• TIFF’s investment philosophy and macro views, including strategic asset allocation, short-duration positioning, and perspectives on the U.S. dollar and long-term debt.
• The implications of the newly expanded endowment tax tiers, and how institutions may adapt portfolio strategies in response.
• Why liquidity is top of mind for nonprofit investors, and how private market exposure, secondary sales, and tax strategies are being re-evaluated.
• Why TIFF believes private equity remains compelling—even as many institutions pull back—and how current market sentiment may present attractive entry points.
• How TIFF approaches hedge funds as diversifying strategies requiring disciplined manager selection, risk management, and thoughtful portfolio construction.

Listen on Spotify→
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Disclaimer: Kane Brenan is the CEO, and Anne Duggan is the Managing Director, Client CIO Group at TIFF Investment Management. All views expressed by them on this podcast are solely their opinions and do not reflect the opinions of TIFF. You should not treat any opinions expressed by Kane or Anne as a specific endorsement to make a particular investment. References to any securities are for informational purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Any past performance discussed is not indicative of future results. Please keep in mind that investment in a fund entails a high degree of risk, including the risk of loss. Please note that the ads featured in this podcast are not endorsed by TIFF, and TIFF is not a sponsor of these ads.

Educational Alpha is a podcast hosted by Bill Kelly, Founder and Managing Member of Educational Alpha, LLC. The show features candid conversations with senior leaders on capital allocation, investment innovation, and long-term thinking in finance.

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute an offer or advertisement of TIFF’s investment advisory services or investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

These materials may contain forward-looking statements relating to future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other comparable terminology. Although TIFF believes the expectations reflected in the forward-looking statements are reasonable, future results cannot be guaranteed.

Jay Willoughby, CFA, CIO of TIFF Investment Management, was featured in FIN News sharing how private equity and hedge funds may help endowment portfolios under fiscal pressure, including tax burdens and federal funding cuts.

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The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute an offer or advertisement of TIFF’s investment advisory services or investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

These materials may contain forward-looking statements relating to future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other comparable terminology. Although TIFF believes the expectations reflected in the forward-looking statements are reasonable, future results cannot be guaranteed.