[ I N D E P T H | C R Y P T O ]
nterest from institutional investors in
Icryptocurrencies has been undoubtedly rising with each passing year , sparking a flurry of crypto and digital asset initiatives launched with non-retail participants in mind .
What we ’ ve known for a while , is that hedge funds and family offices have partaken in the whirlwind digital asset market , but the level tends to drop off at the more traditional asset management end of the spectrum . Traditional asset managers have held back from dipping their toes into this explosive market due to its volatile nature , a lack of appropriate infrastructure and by accountability to their end investors . In their eyes , the cryptocurrency market still has some growing up to do .
But once the many remaining questions around regulation and infrastructure are solved , and new products – whether that ’ s derivatives or ETFs – crop up , the rise in asset management participation is inevitable .
“ We only deal with institutions and corporates – we do not serve retail investors . We can certainly attest to the fact that interest in our products and services has exploded over the last 12 months ,” says Chris Tyrer , head of Fidelity Digital Assets Europe .
Research has shown that hedge funds are leading the charge in the crypto space , with the more traditional hedge funds ( non-crypto specific ) beginning to dabble . A report by the Alternative Investment Management Association ( AIMA ), PWC and Elwood Asset managers in May found that 21 % of traditional hedge fund managers are investing in digital assets , with
another 26 % planning to invest .
The barriers to investments cited by the hedge funds surveyed included regulatory uncertainty , lack of infrastructure , and client risk or reputational risk .
The Wild West For traditional asset managers , the reasons for not entering the space do not differ significantly from those listed by traditional hedge funds . Digital assets do not translate well into the rigorous risk management processes that investors require when planning to entrust their capital to a fund manager .
42 // TheTRADE // Summer 2021