Crypto in the Institutional Portfolio

Crypto Portfolio

Rapid growth in decentralized finance (“DeFi”) and cryptocurrencies has begun to put pressure on institutional investors. Their clients, board members, and the investor community at large want to understand their views on and plans for the “crypto” space. As a result, most institutional investors are
warming to the idea of gaining crypto exposure in their portfolios.

A 2021 Fidelity Investments survey found that 7 in 10 institutional investors expect to invest in digital
assets in the future. Even pensions, perhaps the most conservative of institutional investors, have
begun to invest in crypto. Houston Firefighters’ Relief and Retirement Fund’s recent $25mm investment in NYDIG, a Bitcoin-focused fund, garnered significant attention from the financial press. CIO Ajit Singh noted that crypto “became an asset class we could not ignore anymore.” Ray Dalio’s recent crypto interest has also been well-covered. Dalio has emphasized the value of cryptocurrencies in the context of global currency threats, advocating that Bitcoin should represent about 20% of investors’ portfolios.

In response to institutional investor demand, an increasing number of asset managers are entering the crypto space. PwC’s 2021 Global Crypto Hedge Fund Report found that there are currently between 150 and 200 active crypto hedge funds, and that four in every five of these funds were launched between 2017 and 2020. Crypto hedge fund AUM increased to nearly $3.8bn in 2020 from $2bn the previous year.

Despite widespread interest, certain industry vets remain skeptical of the asset class. Jamie Dimon, JPMorgan Chase chairman and CEO, has remained steadfast in his anti-crypto outlook, recently arguing that ”bitcoin is worthless.” Despite Dimon’s personal views, JPMorgan has given its wealth management clients access to crypto funds, and they have built out a unit dedicated to blockchain projects. With impressive returns and widespread interest, it has become increasingly difficult for skeptics
to overlook the asset class.

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