Long-term investment performance of digital assets is driving increased institutional investment in the sector, according to research.
London-based digital assets hedge fund manager Nickel Digital Asset Management surveyed institutional investors and wealth managers across several countries, revealing that 63% ranked cryptocurrencies among their top five assets for the best risk-adjusted returns over the next five years.
That compares with 60% selecting US equities and 55% selecting European investment grade debt while 54% selected European equities among their top five. By contrast, just 12% selected gold.
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The research also found growing confidence in cryptocurrencies among institutional investors, with 37% expecting widespread adoption as an investment within five years and 41% within seven years.
The findings highlighted a shift towards increased exposure to cryptocurrency and digital assets among institutional investors who already have some exposure to the asset class. Currently, only a quarter have 1.5% or more of their assets allocated to the digital asset sector.
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However, within three years, nearly 88% estimated they will have 2% or more of their assets allocated to the sector, while around 30% estimated it will be 3% or more.
Anatoly Crachilov, CEO and founding partner at Nickel Digital, said: “As digital assets build a track record of resilience and sustainable recovery, institutional investors are increasingly recognising its
potential as a standalone asset class, well beyond fad, as some were inclined to believe in the past.”
Confidence in longer-term performance is growing, propelled by improving regulatory clarity and the involvement of the world’s largest asset managers. This is reflected in the long-term risk-adjusted return expectation and broader plans of the institutions and wealth managers.”
