Bitcoin, NFTs attract family offices, super-rich in Hong Kong, Singapore as investors look to diversify portfolio, study shows
- Nearly 60 per cent of family offices and ultra-rich individuals have been investing in digital assets for the past two years, a KPMG China-Aspen Digital report shows
- Bitcoin and ethereum were the most popular digital assets, while interest in NFTs and DeFi was rapidly growing
Most family offices and high net worth individuals (HNWIs) from Hong Kong and Singapore have taken to digital assets, shrugging off the volatility roiling the market for the past two years, according to a new report.
Some 58 per cent of them were investing in digital assets while 34 per cent intend to do so, according to a joint study published by KPMG China and Aspen Digital on Monday. Over 60 per cent of the 30 family offices and HNWIs in both cities had assets under management ranging from US$10 million to US$500 million.
Bitcoin and ethereum were the most commonly invested assets, while non-fungible tokens (NFTs) and decentralised finance (DeFi) saw the fastest-growing interest among the respondents.
“NFTs have seen an explosion in interest since 2021, while the interest in DeFi began in 2020 and remains interesting,” said Yang He, CEO of Aspen Digital, a cryptocurrency asset management platform.
Digital assets have evolved as an alternative asset class as investors are tempted by high returns. Portfolio diversification has also driven interest in digital assets. Since the sell-off in November 2021, the global market value of digital assets has halved to US$1.5 trillion, according to Hex Trust, a digital asset custody firm.
Bitcoin has borne the brunt of the sell-off, losing nearly 58 per cent this year, according to cryptocurrency exchange CoinDesk.
The Aspen CEO said he expects the trend to continue in favour of higher allocation for digital assets, while surging participation by mainstream institutional investors has helped to spur credibility in digital assets to investors.
Major industry players like JPMorgan Chase have been providing access to six cryptocurrency funds to major wealth management clients since July 2021, while Morgan Stanley began offering clients access to bitcoin funds in March, according to the report.
“For HNWIs and family offices, there is real possibility of a big upside, so they may think why not stick 2 or 3 per cent of my portfolio in that and see what happens,” said Paul McSheaffrey, senior banking partner at KPMG China, said in an interview.
Investors’ allocation still remains small, with 60 per cent of those surveyed allocating 5 per cent or less of their portfolio to digital assets.
A portfolio asset allocation of 5 per cent is small enough that it would not be a massive issue if it was lost, said McSheaffrey.
The proportion is likely to remain relatively small, with 40 per cent of investors saying they intend to invest 5 to 10 per cent of their portfolio in digital assets, while 33 per cent said they want the proportion to remain below 5 per cent.
Lack of regulatory clarity, high volatility and limited research and valuation were the top three obstacles to digital asset investments, according to the study.
“For the traditional older generation reputation is becoming very important and making sure they’re investing the right way,” said McSheaffrey.
As more regulation comes in, the more confident investors will feel about placing their wealth into digital assets, he added.
Hong Kong’s regulators are “first class” and “there is strong investor protection”, said McSheaffrey.
“I think there’s probably engagement needed between the industry and the regulator, to make sure [the new policy] is a properly fit for purpose for family offices,” he added.