The multibillionaire Israel Englander has spent more than three decades building Millennium Management into one of the largest, most prominent hedge funds in the world. Millennium is what's known as a pod shop, meaning the firm allocates capital to small teams that have their own investing strategies and a lot of control over what they invest in.
There are still parameters set by the fund, but investors should understand that Englander is not making all of Millennium's investments on his own, and they should do their own due diligence before investing.
Still, they should pay attention to the firm's larger positions because they offer a glimpse into how some of the brightest investors in the world are thinking.
In the fourth quarter, Millennium trimmed its position in the artificial intelligence (AI) chip king Nvidia and piled into a BlackRock exchange-traded fund (ETF) that MicroStrategy co-founder Michael Saylor thinks could soar 13,200%.
Cutting Nvidia
In the fourth quarter, Millennium cut its position in Nvidia by 10% and trimmed its position in Nvidia call and put options by 12%. The chipmaker remains Millennium's fifth-largest equity holding, and its stock generated about a 10.5% gain in the fourth quarter, by no means its best quarter but certainly nothing to sniff at.
A lot happened in the fourth quarter, including Donald Trump's presidential election win and a sell-off in December amid investor concerns about inflation and the Federal Reserve's plans for interest rates.
Many investors have been excited about the prospects of Trump's pro-business administration, but things have been more mixed for Nvidia. Trump promised significant tariffs during his campaign and has begun to implement some during his first month in office. Tariffs could threaten Nvidia's partnership with Taiwan Semiconductor Manufacturing, which makes a lot of Nvidia's next-generation chips.
Right before President Joe Biden left office in January, his administration proposed sweeping new export rules on Nvidia chips to prevent China from accessing advanced AI technology. Those rules have not been implemented yet, but the emergence of China's DeepSeek earlier this year may have increased the probability of Trump doing so or perhaps issuing his own rules, which would likely be a headwind for Nvidia.
DeepSeek supposedly developed an AI chatbot at a fraction of the cost of competitors like OpenAI and with old Nvidia chips. The new export rules could go into effect within a few months.
Moving into crypto
In the fourth quarter, Millennium increased its holdings in BlackRock's iShares Bitcoin Trust ETF (IBIT +1.05%), one of the main spot Bitcoin exchange-traded funds, by 27%. Spot Bitcoin ETFs mirror the price of the cryptocurrency by buying and storing the token and then selling shares based on how much Bitcoin it owns at any one time. If Millennium purchased Bitcoin before the election, then it has done quite well on its investment.
Trump embraced Bitcoin on the campaign trail and has made many pro-crypto moves since taking office. He has named crypto advocates to his administration, removed regulators who took a restrictive approach to it, and signed pro-crypto executive orders like exploring the possibility of a strategic Bitcoin reserve.
We don't know exactly what Englander or the Millennium team were thinking when they bought the BlackRock ETF, but there's a good chance it was a bet on the election. Many other top fund managers have purchased Bitcoin as an inflation hedge, citing concerns that the U.S. government's budgetary policies could eventually drive inflation sky high.
There is arguably no bigger proponent of crypto than MicroStrategy's Saylor, who has transformed his data intelligence company into what he calls a Bitcoin treasury. The company has purchased a huge number of bitcoins since 2020 and now owns about 2% of all tokens outstanding.
Last November, Saylor told CNBC that he thinks Bitcoin's price will hit $13 million by 2045. He bases this forecast on the digital currency generating a 29% annualized rate of return during the next 21 years.
It has been generating 60% on an annualized basis, but he believes returns will decrease as volatility declines, and he has also said that he thinks Bitcoin will increase from 0.1% of the world's wealth to 7%.
Saylor has scored big during the past five years. However, I wouldn't read too much into his long-term price forecast, which seems a lot like back-of-the-envelope math. Trying to make price predictions on a volatile asset like Bitcoin is very difficult. That said, I am bullish on the token and think investors can allocate some capital to the crypto, which so far has proved to be a good diversification move.
