Fidelity survey shows institutional crypto gaining, Europe leads US

In a survey of almost 800 institutional investors across the US and Europe, 36% of respondents say they are currently invested in digital assets, and 6 out of 10 believe digital assets have a place in their investment portfolio. That 36% breaks down to 27% in the US and 45% in Europe. Bitcoin continues to be the digital asset of choice with over a quarter of respondents holding bitcoin; 11% have exposure to Ethereum.

The survey revealed higher penetration with crypto hedge and venture funds, as expected, but also the financial advisor, high net worth individual and family office segments. US investors allocated to digital assets increased to 27% from 22% in 2019. Of all US and European investors who have exposure to digital assets, over 60% buy digital assets directly. 59% of US investors who currently invest, are invested directly, up from 55% in the 2019 survey.

And amongst the backdrop of recent market growth in the number of crypto native and incumbent service providers offering cash and physically settled futures contracts, 22% of US respondents invested in digital assets have exposure via futures, which is a substantial increase relative to 9% of US investors surveyed in 2019.

Looking out five years, 91% of respondents who are open to exposure to digital assets in a portfolio expect to have at least 0.5% of their portfolio allocated to digital assets. Amongst U.S. respondents, this number is up by 9 percentage points vs. 2019 from 79% to 88%.

Tom Jessop, president of Fidelity Digital Assets, said in a statement: “These results confirm a trend we are seeing in the market towards greater interest in and acceptance of digital assets as a new investable asset class. This is evident in the evolving composition of our client pipeline, which spans from crypto native funds to pensions.”

Almost 80% of institutional investors find something appealing about digital assets, with the three almost equally compelling characteristics across US and European investors being: uncorrelated to other asset classes (36%); an innovative technology play (34%); and high potential upside (33%). Amongst US respondents, the portion of investors who find appealing characteristics in digital assets grew by six percentage points to 74% this year. European investors are even more positive on digital assets with 82% finding something appealing.

A notable contrast is that 25% of European investors find the fact that certain digital assets are free from government intervention to be appealing, whereas only 10% of investors in the US feel this way.

Digital Assets Within a Portfolio
The majority of institutional investors (6 in 10) feel digital assets have a place in their portfolio, though opinions vary on precisely where. Nearly 40% of institutional investors believe digital assets belong in the alternative asset class, while 20% of investors believe they belong in an independent asset class. Those investors may see certain advantages in digital assets over traditional alternatives such as hedge funds, private equity, real estate, etc. in that they are relatively more liquid, have low transportation, transaction and storage costs and have unique return drivers.

Factors Slowing Institutional Adoption
Despite the upward trending number of institutions adopting digital assets, some reticence remains. Among the obstacles to digital asset adoption cited were price volatility (53%), concerns around market manipulation (47%), and lack of fundamentals to gauge appropriate value (45%). Encouragingly, among U.S. respondents, the strength of concerns decreased notably vs. last year across most factors. Price volatility concern fell 13 points, concerns around market manipulation fell 6 points and lack of fundamentals fell 8 points.

“Investor concerns are largely focused on issues that will resolve themselves as the market infrastructure evolves,” said Jessop in a statement.

This marks the second consecutive year that Fidelity has conducted this survey amongst US institutional investors and the first for European investors. The research was conducted from November 2019 to early March 2020 and sought to understand institutional interest and adoption of digital assets, as well as the key barriers to participation in the asset class. Nearly 800 U.S. and European investors were surveyed, including financial advisors, family offices, pensions, crypto and traditional hedge funds, high net worth investors, and endowments and foundations.

Read the full release

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