Institutional investors are like kids in a candy store, looking with longing at the stratospheric returns of bitcoin and other cryptocurrencies without the means to invest, at least for now.
As attractive as 1,200%-plus returns might be, concern about the speculative nature of cryptocurrency investment and the lack of institutional-quality infrastructure and reporting will deter near-term investment by asset owners, sources stressed.
In fact, industry observers — including investment consultants, hedge fund-of-funds managers, asset servicing executives and cryptocurrency hedge fund managers — said they could not name a single institutional investor that has taken the plunge.
Two cryptocurrency funds targeted at institutional investors — hedge fund 3iQ Global Cryptoasset Fund and hedge fund of funds The BitBull Fund — launched in November and manage about $20 million for family offices and high-net-worth individuals.
"It is not at all surprising that institutional investors are presently refraining from investing in the cryptocurrency space. The nature of the investment mandates for these institutions is geared toward steady growth coupled with capital preservation, and to date, the crypto space has been very volatile," said Steven B. Nadel, a partner in the hedge fund practice of Seward & Kissel LLP, New York.
"Cryptocurrency is not yet an institutional asset class. There might perhaps be an investment through a growth equity fund or something, but I haven't heard of any and I think it unlikely," said the chief investment officer of a large U.S. public pension plan who asked not to be identified.