Crypto Digital Asset Funds – An Easy Way Into Crypto Investing For Family Offices?

Changes in interest rates, rising inflation and various macroeconomic developments drive the demand for diversification within family offices’ investment portfolios. Digital assets, specifically cryptocurrencies, NFTs, blockchain technologies and innovation within the digital assets ecosystem are garnering significant interest as a result.

According to a recent Goldman-Sachs survey of 150 global family respondents, 15% globally and 25% in the Americas are already invested in cryptocurrencies. At the same time, almost half indicated an interest in initiating exposure in the future. The 2022 Global Family Office Survey from BNY Mellon paints a similar picture reporting that out of 200 respondents, three out of four family offices are engaging with cryptocurrencies by either investing in or exploring them.

There’s far more to crypto investing than simply buying coins and for those considering this move numerous yield opportunities and strategies exist. A recent post from Sygnum provides a nice overview of these.

Fund Managers and ETFs – the easier way in

There are several ways to facilitate family office crypto investments and leverage existing yield models like crypto loans, staking and yield farming, and for family offices, fund managers often offer the most convenient way to enter this space. This is because crypto and blockchain investment fund managers have an array of products specifically designed for HNWIs, family offices and institutional investors. These products provide exposure to crypto and blockchain as asset classes with the need for investors to bear the burden and responsibility of custody.

Most fund managers offer a range of funds with various minimum investments, fee structures, and liquidity schedules. Investment strategies may include passive or active management of cryptocurrencies, venture-style investments in early-stage protocols, venture funding in companies in the crypto or blockchain space, and arbitrage. Investor due diligence in these products resembles traditional funds and can potentially allow for diversified exposure to digital assets.

As fund managers, ETFs help reduce the burden of direct crypto asset investment. In autumn of 2021, the first Bitcoin-lined ETF commenced trading. While US regulators have not yet approved ETFs that invest directly in digital currencies, several ETFs offer portfolios to take advantage of cryptocurrency and blockchain technology growth.

There are a few of the fund managers and ETFs that stand out when venturing into crypto and blockchain investments, these include:

Fund Managers

Bitwise is a fast-growing crypto asset manager with $1.3 billion AUM. The firm is renowned for managing the world’s largest crypto index fund (OTCQX: BITW) and pioneering products spanning bitcoin, Ethereum, DeFi, and crypto-focused equity indexes. Bitwise endeavors to make crypto investment easy.

As the investment climate changes and family office investors seek to create strong, diversified financial legacies, Grayscale is a digital-native asset manager with $40bn AUM. The firm offers single asset, diversified and ETF products aligned with these objectives.

Multicoin Capital is a five-year-old thesis-driven investment firm specializing in investing in cryptocurrencies, tokens, and blockchain companies. With $3bn AUM, the organization manages a hedge and venture fund, investing across public and private markets. As a crypto-native fund, Multicoin actively participates in networks via staking, keeper operations, liquidations, and more.

Founded in 2003, Pantera is a digital asset and blockchain investment veteran with $4bn AUM. The company has been active in digital asset investments since 2013, when it founded the first Bitcoin fund. Pantera was the first US institutional asset manager to focus exclusively on blockchain and offers family office investors a full spectrum of exposure to the space. Their offering ranges from illiquid venture capital assets (including early-stage tokens and multi-stage venture capital equity) to more liquid assets like bitcoin and other cryptocurrencies.

Pecunio touted as “the future of money,” is a decentralized investment platform. It provides investors with a diversified portfolio of investments services. These include the Pecunio Crypto Currency Fund (PCC), Pecunio Venture Capital managed accounts, and the world’s first fully gold-backed digital asset (PGX).

ETFS

With over $4.4 billion in assets across its suite of ETFs, Amplify offers HNWIs and family offices seeking growth, income and risk-managed strategies expanded investment opportunities.

For family offices and HNWIs looking for something a little different, Global X offers an investment line-up that spans disruptive tech, equity income, hard-to-access emerging markets, and funds dedicated to blockchain and bitcoin.

ProShares offers an impressive array of ETFs with more than $60 billion in assets. Strategies encompass dividend growth, interest rate hedged bond and geared (leveraged and inverse) ETF investing.

Valkyrie is a financial services company with a digital asset focus. The firm offers family office and HNWI investors the opportunity to gain exposure to the emerging digital asset economy through a traditional actively managed exchange-traded fund (ETF). Financial industry veterans lead Valkyrie with decades of experience across firms, including Guggenheim Partners, UBS, Chicago Board of Trade, Chicago Mercantile Exchange, and The World Bank.

VanEck is a global investment manager offering intelligently designed, future-forward active and ETF solutions with value-added exposures to emerging industries, asset classes and markets. With a differentiated approach to traditional strategies, their product offering in the crypto exchange-traded note (ETN) encompasses a range of digital assets and a crypto basket.

Strong tailwinds

Unprecedented events continue to unfold in 2022. The war in Ukraine is ushering cryptocurrency and digital assets into the spotlight, driving accelerated innovation in the sector. Despite the risks associated with crypto and digital assets, their value as alternatives to fiat currency is becoming increasingly evident in uncertain times. For HNWIs and family offices looking to diversify, these are worthy considerations as part of a balanced portfolio. Fund managers and ETFs offer an easier way to enter this space and derive maximum benefit from the outset.