Investors would like to see digital assets more closely integrated with traditional assets – global research

Around 90% 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.

Laser Digital, Nomura’s digital asset subsidiary,  commissioned an independent global survey with professional investors in 21 countries. They work for pension funds, wealth managers, family offices, hedge funds and investment funds, insurance asset managers and sovereign wealth funds.
 
Collectively, they help manage around $4.956 trillion in assets and work in Europe, the Middle East, the US, China, Hong Kong, Singapore, South Africa and Brazil covering all major financial centres with a wide range of approaches to the digital assets sector.

Key findings from the research include:
 
. Investors overwhelmingly regard digital assets as a major part of the investment landscape – 96% of those questioned see digital assets as representing an investment diversification opportunity alongside traditional asset classes such as fixed income, cash, equities and commodities.

. Investors would like to see digital assets more closely integrated with traditional assets. More than nine out of 10 (91%) 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% 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%) professional investors interviewed are positive about the digital asset class in general and Bitcoin and Ethereum in particular over the next 12 months. Just 3% of respondents are negative about the outlook for the sector while 15% are neutral.

. Around nine out of 10 (88%) say they or their clients are currently considering investing in digital assets

. Nearly half (48%) regard the 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%) believe they represent a long-lasting source of investment opportunities while also being highly speculative assets while 26% view them simply as highly speculative assets.

. They are not just focused on the big two cryptocurrencies – 88% of those questioned said they saw value in being exposed to other carefully-chose cryptocurrencies beyond Bitcoin and Ethereum. Just 12% 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%) questioned say they can invest up to 5% while 30% can invest up to 4%.

. Nearly half (45%) say their and/or their clients’ total percentage exposure to digital assets will be between 5% and 10% over the next three years and just 0.5% say they will have no exposure

. Our study look at investors’ preferred exposure to the digital asset class and found Momentum at 80% the most popular ahead of Value at 68% and Carry at 61%. However more than three-quarters (77%) said they would favour a risk-adjusted combination of all these factors.


CHALLENGES AND HURDLES

More than three out of four (76%) 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%) questioned cited this as an issue while another 5% did not know whether they would have to. Just one in five (19%) are confident they would not need to make regulatory filings or notifications.

In addition, around 82% 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.

QUOTE

Commenting on the research findings, Dr Jez Mohideen, CEO of Laser Digital, said:
“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.”

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ABOUT THE RESEARCH

Laser Digital commissioned the independent market research company Pureprofile to interview 303 professional investors working for pension funds, wealth managers, family offices, hedge funds and investment funds, insurance asset managers and sovereign wealth funds. They were interviewed online during April 2023 and represent companies based in Bahrain, Brazil, China, Denmark, Finland, France, Germany, Hong Kong, Italy, the Netherlands, Norway, Qatar, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, the UAE, UK and US * Bloomberg data on Q1 2023 from Bitcoin becomes the best-performing asset class in Q1, 2023 (finbold.com)