The key players of financial markets, banks, and pension funds, are showing their growing interest in crypto markets via converting their investment functions to digital investment platforms or building their management bodies as a digital form of traditional investment activities. We had a look at this interest in our previous articles(The Digital Adventure of Banks&Rising Appetite of Pension Funds). Now, we have new visitors in crypto markets: family offices.
Whilst family offices are private wealth management advisory firms serving ultra-high-net-worth individuals (UHNWI), they have additional functions compared to traditional wealth management companies such as offering totally outsourced solutions to manage the financial and investment activities of affluent individuals or families together. In comparison to the corporate body of institutional investment functions, they are more agile and quite open to innovative investment solutions. Even though family offices are building their investment strategies mainly on a long-term perspective, with the development of more sophisticated risk management tools and other analysis methods, crypto assets, and alternative investment options are now analysed more closely.
Family offices’ assets under management reached above 2 billion USD and investment portfolios are broadly diversified with 35% allocated to alternative investments, 23% to developing markets equities, 14% to real estate, and 16% to private equities. Especially, after PayPal’s adoption of cryptocurrency payments in October 2020, Bitcoin and other crypto assets with high market cap are now considered as safer investment vehicles by family offices as well. In addition to actively-trading fungible assets, non-fungible tokens (NFTs) and new possibilities of DeFi are also being followed up more closely.
Another motivation for the shift in investment strategies of family offices from traditional investment strategies to alternative options is the rising awareness about philanthropy initiatives especially among the third generation of family offices. Climate change and major environmental challenges are being considered more within the investment decision trees, and alternative investments like cryptocurrencies match these strategies more compared to other options in these new age concerns. Some of the Family Offices that have already invested in Blockchain Technology and Crypto Assets include Lorente Family Office, Solon Mock Capital, Dan Tierney Single Family Office, Yeomans Capital, Winklevoss Capital, Galay Investment Partners (3,4).
As a response to increasing interest of Family Offices in this topic, DC Finance is organising The World of Blockchain & Cryptocurrencies Online Conference specifically for Family Offices and HNWIs on the 21st of January 2021. The confence aims to shed light on areas including, but not limited to, the promise of tokenisation, crypto asset volatility, DeFi, mining and opportunities to investors & family offices from varying perspectives. More details and agenda can be found here.
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