Laser Digital, Nomura’s digital asset subsidiary, has published the results of an independent global survey of hedge funds, representing over USD1 trillion in assets, and their attitudes to investing in digital and crypto asset markets.
Key findings from the research include:
• Hedge fund investors overwhelmingly regard digital assets as a major part of the investment landscape – 96 per cent of those questioned see digital assets as representing an investment diversification opportunity alongside traditional asset classes such as fixed income, cash, equities and commodities
• Hedge fund managers would like to see digital assets more closely integrated with traditional assets. More than nine out of 10 (91 per cent) questioned want to see digital assets combined with other traditional asset classes to produce ‘all-weather’ income strategies to help cope with the risk of inflation and the debasement risk of fiat currencies
• Around 90 per cent said that it is important to have the backing of a large traditional financial institution for any digital asset fund or investment vehicle before they or their clients would consider putting money into it
• More than four out of five (82 per cent) professional investors interviewed are positive about the digital asset class in general and bitcoin and Ethereum in particular over the next 12 months. Just three per cent of respondents are negative about the outlook for the sector while 15 per cent are neutral.
• Around nine out of 10 (88 per cent) say they or their clients are currently considering investing in digital assets
• Nearly half (48 per cent) regard bitcoin and Ethereum as providing a foundation of the Web 3.0 economy and therefore representing a long-lasting source of investment opportunities. Another quarter (26 per cent) believe they represent a long-lasting source of investment opportunities while also being highly speculative assets while 26 per cent view them simply as highly speculative assets
• They are not just focused on the big two cryptocurrencies – 88 per cent of those questioned said they saw value in being exposed to other carefully-chosen cryptocurrencies beyond bitcoin and Ethereum. Just 12 per cent saw no value in expanding into other cryptocurrencies
• Investors reported a wide range of maximum allocations to digital assets under their risk boundaries. More than a fifth (22 per cent) questioned say they can invest up to 5 per cent while 30 per cent can invest up to 4 per cent.
• Nearly half (45 per cent) say their and/or their clients’ total percentage exposure to digital assets will be between 5 per cent and 10 per cent over the next three years and just 0.5 per cent say they will have no exposure
• Investors’ preferred exposure to the digital asset class found Momentum the most popular at 80 per cent, ahead of Value at 68 per cent and Carry at 61 per cent. However more than three-quarters (77 per cent) said they would favour a risk-adjusted combination of all these factors.
Challenges and hurdles
• More than three out of four (76 per cent) say there are legal or regulatory restrictions applicable to them that could prevent their fund or clients investing in a product that references exposure to digital assets.
• Most would have to make regulatory filings or notifications as a result of holding or investing in financial instruments focused on digital assets. Around four out of five (76 per cent) questioned cited this as an issue while another 5 per cent did not know whether they would have to. Just one in five (19 per cent) are confident they would not need to make regulatory filings or notifications.
• In addition, around 82 per cent say they are aware of regulatory filings or notifications that the issuer of digital financial instruments must make as a result of investors holding or investing in their financial instruments.
Commenting on the research findings, Dr Jez Mohideen, CEO of Laser Digital, says: “Our comprehensive study reveals that the majority of institutional investors surveyed saw a clear role for digital assets in the investment management landscape, and the benefits they can bring, such as greater diversification of portfolios.
“For many, their outlook for major digital assets such as bitcoin and Ethereum is positive, but our study also reveals challenges and hurdles for the market. Many of our survey respondents acknowledged that there are legal and regulatory restrictions that could prevent them from investing in digital assets, and these need to be addressed by the industry in cooperation with regulatory authorities.”
