London-based digital asset hedge fund manager Nickel Digital Asset Management has published research that finds that institutional investors are increasingly recognising the importance of digital assets in diversified investment portfolios.
More than nine out of 10 (92 per cent) agree digital assets have an important role to play in portfolios but most prefer the investment level in digital assets to be moderate.
Its study with institutional investors and wealth managers in the US, UK, Germany, Switzerland, Singapore, Brazil and the United Arab Emirates who collectively manage around USD3.5 trillion in assets, found 66 per cent believe digital assets role should be moderate in a diversified portfolio.
Just 32 per cent believe they can play a significant role while 39 per cent believe they should play a small role in portfolios. Around 42 per cent believe crypto and digital assets should only be included for a specific investment angle while just 7 per cent say they should not be included.
Nickel’s study found that the growing consensus on using digital assets for diversification is backed by growing optimism about fund launches in the sector. Around 62 per cent questioned expect a recovery digital asset focused fund launches over the next 12 months compared with last year. Almost all (96 per cent), however, believe the backing of a major financial institution is important before they invest with 57 per cent saying it is very important.
Along with fund launches, institutional investors are forecasting growth in the use of tokenisation of investment funds and asset classes. Around 85 per cent predict growth in tokenisation over the next three years with 25 per cent expecting dramatic growth.
However, volatility remains the biggest barrier to investing in the crypto and digital assets sector for institutional investors who are sceptical. More than half (51 per cent) who are reluctant to invest cite worries about volatility while 45 per cent have concerns about security and 40 per cent worry they don’t understand the sector. Just a third (34 per cent) are concerned about regulation.
Anatoly Crachilov, CEO and Founding Partner at Nickel Digital says: “Institutional investors and wealth managers are gradually discovering the diversification benefits offered by digital assets in portfolio construction.”
“There are a range of views of course on what sort of role digital assets should play with most focusing on a moderate role which tallies with most expert views on how digital assets can support performance.”
