Wealth managers and institutional investors are anticipating an increase in traditional financial institutions launching digital asset funds, with the asset class increasingly seen as attractive for risk-adjusted returns.

Research from Nickel Digital Asset Management found that 43 per cent of wealth managers and institutional investors expected a dramatic increase in firms launching crypto funds and investment solutions over the next two years, while a further 53 per cent anticipated a slight increase.

Nearly three-quarters (73 per cent) of respondents expected an increase in digital asset fund launches in general this year, with just 2 per cent predicting a decline.

Nickel said that the increasing involvement of traditional institutions was good news for the sector, with 18 per cent of wealth managers saying their involvement was very positive and 74 per cent saying it was quite positive.

When asked about the five asset classes they believed offered the biggest opportunities to generate attractive risk-adjusted returns over the next five years, cryptocurrency was cited by 66 per cent of respondents.

This was followed by private equity (64 per cent), emerging market equities (61 per cent), commodities (50 per cent), real estate and European investment-grade debt (both 47 per cent).

Firms believed that actively managed diversified long-only portfolios were the most favoured way to access the digital asset space, followed by actively managed diversified long-short portfolios, while passive diversified portfolios were the third choice.

“Traditional finance firms are already making significant strides into the digital assets space and that is only predicted to increase over the next two years,” said Nickel Digital CEO founding partner, Anatoly Crachilov.

“The views of institutional investors and wealth managers on the ability of crypto to deliver attractive risk-adjusted returns helps to explain why that is the case, and why professional investors increasingly expect crypto to be part of institutional investors portfolio allocation.”

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