31% of hedge fund managers plan to invest in cryptocurrencies, says EY study
It seems contradictory, but traditional and alternative investors are slowly turning to cryptocurrencies, according to a new study published this Monday (22) by Ernst & Young (or EY), one of the four largest accounting firms in the world.
According to the survey, 31% of hedge fund managers, 24% of alternative investors and 13% of private equity managers said they plan to add crypto to their portfolios within two years.
Managers at the biggest companies (hedge funds that manage more than $10 billion or investors with $2 billion to $10 billion) are more likely to plan to move into cryptocurrencies, according to the study.
“Alternative investing” is an umbrella term for anything other than a stock, bond, or cash. This includes precious metals, artwork and real estate. It could even be a set of rare and holographic Pokémon cards or a collection of wines.
Only 7% of alternative fund managers and investors interviewed for the EY study said they or their companies already have “crypto-related assets” in their portfolio.
Among those that store cryptocurrencies directly, derivatives (futures or options) and providing financing to private blockchain companies were the most popular forms of participation.
Joe McCarney, global blockchain security leader at EY, told Decrypt that even fewer companies were already investing in crypto by 2020. That was before a specific question asked if they had already been added to the survey.
78% of crypto-resistant companies cited the fact that these assets don’t fit into their fund’s strategy as the main or one of the main reasons they haven’t invested yet.
- China arrests senior Communist Party official for supporting bitcoin mining
- Michael Saylor recommends Elon Musk to sell part of his Tesla shares and invest in Bitcoin
- AMC already has 14% of online purchases made with cryptocurrencies
Other big reasons include volatility, regulatory uncertainty and lack of understanding of the asset class.
The “2021 Global Alternative Fund Survey”, conducted by Greenwich Associates between July and September, questioned 264 alternative institutional investors. It’s a small group of respondents, but they represent funds totaling nearly $5 trillion.
The response time did not match with the Securities and Exchange Commission (or SEC) approval of the first US bitcoin futures (BTC) index fund (or ETF) (an investment vehicle that allows acquirers to gain exposure bitcoin without having to buy or store it) in a few weeks, but McCarney doubts it will have a big impact on sentiment among alternative fund managers.
In his opinion, alternative fund managers care more about cybersecurity and the availability of custody solutions at the institutional level.
“I believe that a larger catalyst for this movement into digital assets has been the continued enhancements to the institutional level controls being put in place at custodians and exchanges,” explained McCarney.
“These enhancements have helped to overcome some of the earlier concerns about security of digital assets.”
These improvements and controls include multi-signature transaction approvals rather than trying to figure out who to trust with a private key, plus the ability to generate detailed audits that will pass regulators’ testing.
With informations: Decrypt