Institutional investors are beginning to see the appeal of digital assets, with many looking to invest more in them over the next five years, according to new research from Fidelity Investments.
The survey finds that about 22 percent of institutional investors already have some exposure to digital assets, with most investments having been made within the past three years. Four in 10 respondents say they are open to future investments in digital assets over the next five years.
These findings are part of a Fidelity Investments research study to better understand how institutions and investors think about digital assets both overall and as part of an investment portfolio.
Almost half (47 percent) of the institutional investors surveyed view digital assets as having a place in their investment portfolios. But opinions vary on how these investors would prefer to hold digital assets in the future. For example:
– 72 percent prefer to buy investment products that hold digital assets
– 57 percent prefer to buy crypto-assets directly
– 57 percent prefer to buy an investment product that holds digital asset companies.
‘We’ve seen a maturation of interest in digital assets from early adopters like crypto-hedge funds toward traditional institutional investors like family offices and endowments,’ says Tom Jessop, president of Fidelity Digital Assets, in a statement.
‘More institutional investors are engaging with digital assets, either directly or through service providers, as the potential impact of blockchain technology on financial markets – new and old – becomes more readily apparent.’
Institutions are overwhelmingly favorable about the appealing characteristics of digital assets, with nearly seven in 10 respondents citing specific traits that appeal. Nearly half (47 percent) of respondents appreciate that digital assets are an innovative technology play and 46 percent find digital assets’ low correlation to other assets among their most appealing characteristics.
Among the obstacles to digital asset investment cited by respondents are price volatility, lack of clarity around regulation, the limited track record and lack of fundamentals.
‘Institutions are doing the work to develop their own investment theses, but there’s more work to be done as it relates to describing digital assets and blockchain technology in terms that are familiar to them,’ adds Jessop.
‘For example, price volatility – a primary concern for survey respondents – may dampen as the underlying custody, trading and financing infrastructure continue to develop in a direction that traditional market participants are familiar with.
‘Institutional sentiment mirrors many of the positive developments we’ve seen in the underlying ecosystem. Venture investment in the sector continues at a healthy pace, complemented by an increasing number of security token offerings, and the global regulatory environment remains cautiously constructive.’
Another indication of a growing ecosystem around digital assets, notes Jessop, is high transaction activity on the bitcoin blockchain. ‘Institutions are more aware of these developments now than they were six or 12 months ago, which is a positive sign for continued interest and adoption,’ he concludes.
