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New research reveals scale of institutional investors’ inflation concerns

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New research from Nickel Digital Asset Management (Nickel) reveals that 55 per cent of institutional investors and wealth managers are ‘very concerned’ about the threat of inflation, and a further 36 per cent are ‘quite concerned’. 

Institutional investors and wealth managers from the US, UK, France, Germany, and the UAE who collectively have USD275.5 billion in assets under management were surveyed, and 43 per cent predict inflation in the US will be higher over the next two years than leading authorities are predicting, and only 2 per cent expect it to be lower. Just over half (54 per cent) believe official predictions are correct.

In terms of the UK, 41 per cent of professional investors interviewed believe inflation will be higher than officials are predicting, and just 5 per cent think it will be lower. Again, just 54 per cent believe official inflation forecasts are correct.

In terms of what those surveyed think institutional investors will do to hedge the threat of inflation, 49 per cent said they expect them to invest in cryptocurrencies for the first time, and 45 per cent said those with allocations to cryptocurrencies will increase them.

Some 47 per cent believe they will increase their allocation to gold to hedge inflation, and 37 per cent said they will increase their exposure to real assets including property, other commodities and infrastructure.

Anatoly Crachilov, co-Founder and CEO of Nickel Digital, says: “Our research shows professional investors are very concerned about the growing threat of inflation, and many fear authorities have underestimated the scale of this problem.”

“However, our findings suggest they are taking action to offset this risk, and many are looking to invest in cryptoassets for the first time or increase their allocation as part of their plans.”

“Bitcoin is increasingly attracting investors’ attention as a long-term hedge against inflation. This is due to its fully transparent and finite supply, hardcoded on the protocol level. Unlike the US Dollar, Euro, or other fiat currencies, Bitcoin supply is capped in an immutable manner, which can’t be increased at the will of any issuing authority or a government. This unique independent monetary policy, full transparency of circulating supply, and credible neutrality are the drivers behind unfolding institutional adoption of crypto assets.”

Nickel Digital’s funds have delivered strong performance despite recent crypto market corrections with its flagship Digital Asset Arbitrage Fund posting record returns in April and May, the months of intense selloff in the Bitcoin market. The fund was up +4.1 per cent in April and +2.6 per cent in May, in the face of Bitcoin dropping more than 40 per cent from April’s highs, taking H1 2021 performance to +12.6 per cent with a Sharpe of over 4, comfortably outperforming gains of 2.5 per cent for an average hedge fund in a closely watched HFRX Equity Market Neural Index (www.hfr.com/family-indices/hfrx), its closest market-neutral benchmark. 

Nickel currently has four funds investing in the digital asset space. Its market-neutral Digital Asset Arbitrage Fund pursues an absolute return strategy without expressing directional views on the underlying cryptoassets market. It exploits market inefficiencies and price dislocations and harnesses swings of volatility to deliver consistent positive returns within a strictly defined risk management framework. Since inception 24 months ago, the fund has delivered strong risk-adjusted returns with no drawdown months and Sharpe of over 4. 

The Nickel Diversified Alpha (Digital Factors) Fund is a non-directional multi-strategy fund which wraps a portfolio of attractive but hard-to-access and capacity-constrained strategies into a single, investible fund. Among the strategies it deploys are high-frequency market making, statistical arbitrage, relative value, trend following, and momentum.

Digital Leaders DeFi Fund is designed to capture the growth potential of the broader digital assets space, spotting early winners in Decentralised Finance, the area of greatest financial innovation. 

Nickel’s Digital Gold Institutional Fund, a bitcoin tracker, provides secure, efficient, transparent, and liquid access to physically allocated Bitcoin. It delivers institutional-grade precision of trade execution available on both weekdays and weekends with one of the industry’s lowest expense ratios. 

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