Alternative Investors Warming Up To Cryptocurrencies — Ernst & Young

According to a study that was released earlier by Ernst & Young, traditional alternative investors may slowly be warming up to cryptocurrencies. The accounting firm’s report details that about 31% of hedge fund managers, 24% of alternative investors, and 13% of private equity managers have all said that they are planning to add crypto to their portfolios over the next one to two years. In addition, the study reveals that investors having between $2 billion to $10 billion, and hedge fund managers who are presently overseeing more than $10 billion, are most likely planning to get into crypto, somewhere down the line.

Survey Reveals Details About Alternative Investors

“Alternative investment” has always been a broad term used to describe anything that’s not a stock, bond, or cash. It includes pieces of art, precious metals, and real estate. But while it seems like cryptocurrencies could easily be a perfect fit among the alternative group, that hasn’t exactly been the case.

Of all the alternative investors and fund managers interviewed for the EY survey, only 7% said they or their firms already have “crypto-based assets” in their portfolio. In fact, even those holding cryptocurrencies directly, mostly participate only in the form of derivatives (futures or options).

78% of holdout firms have also explained that they are yet to invest in crypto for reasons ranging from a lack of understanding of the asset, to volatility, to lack of regulatory clarity.

Alternative Fund Survey Breakdown

Meanwhile, the 2021 Global Alternative Fund Survey, that was also carried out by Greenwich Associates between July to September, researched about 264 alternative institutional investors. While it seemingly looks like a small number of respondents, they represent funds totaling almost $5 trillion.

And although the response window missed the SEC’s approval of the first Bitcoin futures ETF —which would most likely have allowed purchasers to gain exposure to Bitcoin without exactly buying or holding the asset, but that is not supposed to have so much if a significant impact on sentiment among alternative fund managers.

According to Joe McCarney, the global blockchain assurance leader at EY, alternative fund managers are more concerned about cybersecurity and the availability of institutional-grade custody solutions.

McCarney believes that once all the solutions earlier mentioned are available, then that would be an even bigger catalyst for the group’s migration into digital assets.