Fidelity has published research into institutional thinking around digital assets. The company recently launched Fidelity Digital Assets with institutional solutions for custody and execution. 22% of survey respondents (including crypto funds) already have exposure to digital assets and 47% of institutional investors view digital assets as “having a place in their portfolio”.
The survey asked about investment methodology preference. 72% prefer to buy investment products that hold digital assets. 57% prefer to invest in crypto assets directly, and another 57% prefer to purchase an investment product that contains digital asset companies. Clearly, respondents could select more than one answer.
The survey ran from November 2018 to February and covered 441 U.S. institutional investors including pensions, family offices, crypto and traditional hedge funds, financial advisors and endowments/foundations.
The data may have been more insightful had results for crypto funds been split out or their proportion clarified. For example, if crypto funds make up 20% of those surveyed (we don’t know the figure), then the 22% adoption would not look impressive.
“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.
Fidelity’s questions asked about the appealing characteristics of digital assets. 47% see them as a technology play. 46% find the low correlation to other asset classes attractive. And financial advisors (74%) and family offices (80%) are the most attracted to the characteristics.
Negative aspects include price volatility, regulatory uncertainty, limited track records and a 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.”
The survey also covered custody. 37% of institutions prefer a traditional financial firm compared to 24% to a crypto-focused firm. 76% consider security and safety as the most important consideration.
Fidelity published another survey in November last year.