New research from London-based Nickel Digital Asset Management (Nickel), Europe’s largest regulated digital assets hedge fund manager, reveals that institutional investors and wealth managers have dramatically increased their allocation to cryptocurrencies and digital assets over the past 12 months.
New research from London-based Nickel Digital Asset Management (Nickel), Europe’s largest regulated digital assets hedge fund manager, reveals that institutional investors and wealth managers have dramatically increased their allocation to cryptocurrencies and digital assets over the past 12 months.
According to the survey of professional investors from the US, UK, Germany, France, and the UAE, who collectively have around USD108.4 billion in assets under management, 94 per cent increased their allocation to crypto and digital assets over the past 12 months, with one in four (25 per cent) increasing it by over 100 per cent. Just over nine out of ten (94 per cent) plan to invest more in crypto and digital assets over the next year, with 29 per cent expecting to at least double their allocation.
Nickel Digital says most professional investors have tiny levels of exposure to crypto and digital assets as they are ‘testing’ the market in terms of how it works, its infrastructure and liquidity.
When asked where the institutional investors and wealth managers had sourced their funds from to increase their allocation to crypto and digital assets over the past year, 20 per cent said at least half had come from their holdings in real estate. This is followed by 17 per cent who said 50 per cent or more had been taken from selling other crypto and digital asset investments, and the same percentage said this about selling commodity holdings. This is followed by 15 per cent who said half of their new crypto/digital investments had come from selling private equity holdings. However, only 12 per cent of investors said that this level of investment had been made by selling equity holdings, and the corresponding figure for fixed income investments was 13 per cent.
Nickel currently has four funds investing in the digital asset space. Its market-neutral Digital Asset Arbitrage Fund pursues an absolute return strategy without expressing directional views on the underlying crypto assets market. It exploits market inefficiencies and price dislocations, and harnesses swings of volatility to deliver consistent positive returns within a strictly defined risk management framework. The fund returned +15 per cent in 2021, with over 90 per cent of positive months since inception in 2019, with volatility of 3.4 per cent and Sharpe of 3.1.
Diversified Alpha Fund is a non-directional multi-strategy fund which wraps a portfolio of attractive but hard-to-access and capacity-constrained strategies into a single, investible fund. Among the strategies it deploys are high-frequency market making, statistical arbitrage, relative value, and volatility arbitrage. The fund protected capital well in May, delivering a record monthly performance of +4.7 per cent despite the underlying market going through one of the strongest corrections in recent years. It returned +17 per cent in 2021 with volatility of 6.9 per cent and Sharpe of 2.7.
DeFi Liquid Venture Fund is designed to capture the growth potential of the broader digital assets space outside Bitcoin, spotting early winners in Layer 1 protocols and Decentralised Finance, the area of greatest financial innovation. The fund is an actively managed research-driven vehicle aiming at identifying early winners and capturing structural expansion of this space. It returned +28 per cent since inception in mid-March 2021.
Nickel’s Digital Gold Institutional Fund, a bitcoin tracker, provides secure, efficient, transparent, and liquid access to physically allocated Bitcoin. It delivers institutional-grade precision of trade execution available seven days a week with one of the industry’s lowest expense ratios. it returned +67 per cent in 2021, in line with the underlying bitcoin market.
