While crypto assets are considered too risky and too much of an unknown quantity by many traditional asset managers and investment banks, endowments have not shied away from them, with as many as 94% saying they invested in digital assets in 2018, according to a recent survey.
“The results show the sentiment of these endowments towards this new asset class, which has supposedly been shunned by the financial market’s more sophisticated institutional investors,” said the survey. “Our findings confirm some of the lingering worries about the burgeoning asset class, but show a more receptive and inquisitive attitude than might have been expected.”
The survey, conducted by Global Custodian, The TRADE Crypto, and BitGo, polled 150 endowments on their involvement and investments in cryptocurrencies, as well as their intentions for the next 12 months. Among those endowments, 89% were US-based, and the rest were in the UK and Canada.
Cryptocurrencies and crypto funds seem to fit the modus operandi of endowments due to the nature of endowment investments, and their long-term investing horizon, said the survey.
Although the respondents acknowledged several factors that still concern them about investing in digital assets, only 7% said they expect to decrease their allocations over the next 12 months, while 55% said they would increase their allocation, and 38% said it would stay the same.
“While concerns around digital assets undoubtedly linger, cryptocurrencies are evidently becoming more synonymous with other established asset classes in the capital markets as infrastructure and providers continue to grow,” said the survey.
However, the survey did find evidence of fallout from the rollercoaster ride cryptocurrencies took in 2018, citing one respondent who said the crypto market “is way too volatile and the long-term structure is not in place yet to help stabilize pricing swings in the sector.” Two other respondents referenced instability within the market, while another said they were “too scared” to go near it at the moment.
But the survey said those who had invested and moved away from digital assets, and those who remain uninvolved, make up the minority of endowments.
“Overall there is a degree of caution mitigated by feelings that this exciting new asset class could be the future of investing,” said the survey, “or at least a concept worth exploring in the current environment.”