Institutional investors are finding appeal in digital assets and many are looking to invest more in digital assets over the next five years, according to new research from Fidelity Investments. According to the survey, about 22% of institutional investors already have some exposure to digital assets, with most investments having been made within the past three years.
Four in ten 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, advisors, and investors think about digital assets both overall, and as part of an investment portfolio. More than 400 US institutional investors were surveyed, including pensions, family offices, crypto and traditional hedge funds, financial advisors and endowment and foundations.
- Almost half of the institutional investors surveyed (47%) 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.
- 72% prefer to buy investment products that hold digital assets
- 57% prefer to buy crypto assets directly
- 57% 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, to traditional institutional investors like family offices and endowments,” said Tom Jessop, president of Fidelity Digital Assets, in a statement. FDA is a provider of custody and trade execution services for digital assets to institutional investors.
Among the obstacles to digital asset investments cited by respondents were 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,” said Jessop. “For example, price volatility, which was a primary concern of survey respondents, may dampen as the underlying custody, trading and financing infrastructure continues to develop in a direction that traditional market participants are familiar with.”
Custody and counterparties
Many institutions showing interest in this space either own digital assets and need a custodian or they want to invest in digital assets, but first need a custodian. 18% are using third party custodians and another 13% are doing self-custody. Another 6% are using a non-custodial exchange.
When gaining exposure to digital assets, investors overall prefer to deal with a traditional financial firm (37%) followed by dedicated crypto-focused financial firms (24%). Across all institutional segments, when considering a custodian for digital assets, 76% of institutions surveyed placed security and safety as their most important considerations.