Digital Assets: Appetite Up

New Research reveals growing demand for exposure to Digital Assets from institutional investors

New research from Nickel Digital Asset Management (Nickel), an investment manager dedicated to the digital assets market, reveals that 25% of professional investors see the appetite for risk from pension funds and other institutional investors increasing dramatically over the next two years.   A further 47% believe there will be a slight rise, and only 9% think there will be a fall in their risk appetite. Institutional investors and wealth managers from the US, UK, France, Germany, and the UAE who collectively have $275.5 billion in assets under management were surveyed. 

Nickel Digital commissioned the market research company Pureprofile to interview 50 wealth managers and 50 institutional investors across the US, UK, France, Germany, and the UAE.  The survey was conducted online in May and June 2021

The primary reason why institutional investors are more inclined to take on more risk is that economic and fiscal policies from governments will ensure that riskier asset classes will remain attractive – this is the view of 62% of professional investors interviewed.  This was followed by 50% who believe there will be strong economic growth as we come out of the Covid-19 induced economic crisis.    One in three of those interviewed (33%) said low returns on bonds and cash mean investors will be prepared to take on more risk to meet their income and growth targets.

Stronger transparency and regulation around cryptocurrencies and other digital assets were also cited by 29% of professional investors interviewed as a reason for institutional investors being prepared to take on more risk, and 15% said this about other riskier asset classes such as hedge funds.

“A combination of poor returns on bonds and cash, favorable economic and fiscal policies, and greater transparency and regulation in the investment management world is fueling a growing appetite for risk amongst institutional investors.” Says Anatoly Crachilov, co-Founder and CEO of Nickel Digital. “However, to capitalize on this, fund managers focusing on riskier asset classes need to ensure the highest levels of risk management, transparency and reporting to help ensure that pension funds and other institutional investors remain within their risk parameters. In that context, we recommend that our clients limit their directional exposure to crypto assets to between 1% and 3% of their overall portfolio. This allows capturing growth potential of the space, without keeping portfolio risks under control”

Nickel Digital’s infrastructure is designed to offer various access points to the crypto market.

Nickel currently has four funds investing in the digital asset space: a market-neutral Digital Asset Arbitrage Fund, a Diversified Alpha Fund, a Bitcoin tracker, and a DeFi Liquid Venture Fund. The last is designed to capture the growth potential of the broader digital assets space outside Bitcoin, spotting early winners in Layer 1 protocols and Decentralized Finance, an area of interest due to levels of financial innovation. The fund is an actively managed research-driven vehicle aiming at identifying early winners and capturing structural expansion of this space.  The portfolio was up over 30% in August 2021, reflecting the strong recovery of the underlying market.

A family of defensive funds, including Defensive Bitcoin and Defensive Ethereum funds, to be launched in 4Q21, aims to offer institutional-grade exposure to Bitcoin and Ether while managing downside volatility of such portfolios. Nickel will apply an overlay of derivative instruments aiming to reduce drawdown on these portfolios, while capturing the majority of the upside.

For more information visit Nickel Digital Asset Management