New Research: Institutional Investments Likely to Increase over Next 5 Years

Fidelity Digital Assets

Institutional sentiment mirrors many of the positive developments we’ve seen in the underlying ecosystem.

What do institutions really think about digital assets? We talk with different types of institutions all the time and we hear any number of individual perspectives and investment theses. But we still want to know, do they understand the transformative potential here? Are they carving out a strategy that provides for digital assets in their portfolios?

Now, we have new research from Fidelity Investments®, which finds institutional investors are overwhelmingly favorable about the appealing characteristics of digital assets. Nearly seven in ten respondents cited certain characteristics of digital assets as appealing:

  • nearly half of respondents (47%) appreciate that digital assets are an innovative technology play
  • 46% find digital assets’ low correlation to other assets among the most appealing characteristic
  • Financial advisors (74%) and family offices (80%) view the characteristics of digital assets most favorably
Methodology: Greenwich Associates conducted the study on behalf of the Fidelity Center for Applied Technology between November 26, 2018 and February 8, 2019 including 441 institutional investors in the U.S.

What about allocations?

According to the survey, about 22% of institutional investors already have some exposure to digital assets, with most investments having been made within the past three years. Four in ten respondents say they are open to future investments in digital assets over the next five years.

Almost half of the institutional investors surveyed (47%) view digital assets as having a place in their investment portfolios, but opinions vary on how these investors would prefer to hold digital assets in the future. Across all institutional segments, when considering a custodian for digital assets, 76% of institutions surveyed placed security and safety as their most important considerations.

Nearly half of institutional investors see a place for digital assets in their portfolios

Signs of momentum

This institutional sentiment mirrors many of the positive developments we’ve observed. Venture investment continues, alongside good development work, and increasing regulatory conversations. Institutions are more aware of these developments now than they were six or twelve months ago. The people we talk with are actively scanning and observing what’s going on, and considering how this technology would impact their business, and — ultimately — financial markets.

We also wanted to understand more about their concerns. What stage of their journey are different institutional segments in, and what might be helpful as they consider moving ahead. We all know institutional investors still put the work in and do the hard research, even if the market moves in another direction for a time. That work has continued and now we have evidence of it.

Even more compelling is how the range of intermediaries has evolved. We began fielding interest from crypto funds and other early movers. Over the past several months we’re seeing interest among family offices, endowments, pensions, and foundations.

Institutional engagement is here

Institutions are digging in and developing their own investment theses. More education is always welcomed now it seems, specifically by those who can describe digital assets and blockchain technology in terms that are familiar to these types of investors.

We expect more investors will acknowledge the impact this new set of assets will have as we continue to develop this new era of wealth transfer and management.

Security and safety are the most important considerations for institutional investors when choosing a digital assets custodian

This content was created by Fidelity Digital Assets. All rights reserved.

Greenwich Associates conducted the study on behalf of the Fidelity Center for Applied Technology between November 26, 2018 and February 8, 2019 including 441 institutional investors in the U.S.

Digital assets are speculative and highly volatile, can become illiquid at any time, and are for investors with a high risk tolerance.

Investors in digital assets could lose the entire value of their investment.

Services are provided by Fidelity Digital Asset Services, LLC (NMLS ID 1773897).

Third-party marks are the property of their respective owners.

© 2019 FMR LLC. All rights reserved. Fidelity Digital Assets and the Fidelity Digital Assets logo are service marks of FMR LLC.

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Fidelity Digital Assets

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Institutional Solutions for a new asset class. https://www.fidelitydigitalassets.com

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