Major traditional financial institutions are becoming increasingly involved in crypto launching more funds in the sector, with the asset class seen as attractive for risk-adjusted returns, according to new global research by London-based Nickel Digital Asset Management (Nickel).
The study with pension funds, insurers, family offices, wealth managers and hedge funds invested in the sector, found 43 per cent believe there will be a dramatic increase in traditional financial firms launching crypto funds and investment solutions over the next two years. A further 53 per cent believe there will be a slight increase. Nearly three out of four (73 per cent) of the institutional investors and wealth managers questioned expect a rise in digital asset fund launches in general this year with just 2 per cent predicting a decline.
Increasing involvement by traditional institutions is good news for the sector – nearly one in five (18 per cent) say the involvement of major firms is very positive for their involvement in the sector while 74 per cent say it’s quite positive.
Nickel’s research in the US, UK, Germany, Switzerland, Singapore, Brazil and the United Arab Emirates with organisations who collectively manage around USD1.1 trillion in assets, found they believe crypto will be one of their top five asset classes for risk-adjusted returns over the next five years as the table below outlines. Private equity was the next most selected followed by emerging market equities.
The research found 75 per cent believe crypto will become part of portfolio allocation by institutional investors within five years.
Companies questioned say actively managed diversified long-only portfolios are the most favoured way to access the digital asset space, followed by actively managed diversified long-short portfolios with passive diversified portfolios the third choice. Arbitrage-focused hedge funds were ranked fourth ahead of ETFs and ETPs.
