Growing market interest prompts an increased emphasis by family offices on digital assets
Family offices in Asia are increasingly turning their attention to digital assets, with many planning to boost their investments in this sector. Zann Kwan, the managing partner and chief investment officer at Revo Digital Family Office, has highlighted this growing trend among family offices in the crypto space. The objective behind this shift in strategy is to diversify portfolios and potentially enhance returns, encompassing both direct and indirect investments in cryptocurrencies, crypto funds, structured products, and direct private equity investments.
Although digital assets currently make up less than 0.5% of the total assets under management in Asia-Pacific family offices, there is a noticeable trend towards investing in this area. A report by Campden Wealth and Raffles Family Office supports this observation, revealing a growing interest in cryptocurrencies. Approximately 9% of family offices without current crypto investments are planning to enter this asset class.
The interest in digital assets has been reinforced by substantial price increases in cryptocurrencies like bitcoin and ether in 2023. During that period, bitcoin experienced a surge of over 160%, reaching a market cap of over $1 trillion for the first time since December 2021. Moreover, the approval of the first U.S.-listed spot bitcoin exchange-traded funds (ETFs) in January was a significant milestone, expanding investment opportunities for both institutional and retail investors.
Furthermore, Hong Kong has been proactive in regulating digital assets, positioning itself to accept applications for virtual asset (VA) spot ETFs and potentially becoming the first Asian market to introduce such products. Despite these positive developments, macroeconomic challenges and geopolitical tensions have led Asian family offices to adopt a cautious investment approach.
The report also cites Brian Chan from Venture Smart Financial Holdings (VSFG), who noted a growing interest in liquid investments, particularly crypto hedge funds, as family offices seek flexibility in the current economic climate. This comes as the crypto hedge fund sector shows signs of recovery from the challenges it faced in 2022. Towards the end of 2023, there was a significant increase in the industry’s assets under management, indicating a renewed interest in digital asset investments.
On the other hand, crypto venture capital activity experienced a decline in 2023, with investments dropping to one-third of the previous year’s levels. This shift has resulted in a dominance of passive investment products in the crypto fund market, signaling a strategic shift towards more stable and lower-risk investment options.
Meanwhile, blockchain development in Asia continues to thrive, evidenced by recent approvals for the merger of Layer-1 blockchains Klaytn and Finschia. This merger aims to establish a comprehensive web3 ecosystem in the region, involving over 45 companies, 420 decentralized applications (dApps) and services, and over 250 million wallet users.
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