Key Takeaways
- • EY-Parthenon's March 2024 survey of 277 institutional participants (asset managers, asset owners, family offices and hedge funds) found 94% believe in the long-term value of crypto, digital assets and/or blockchain technology.
- • More than two-thirds of institutions are already invested in cryptocurrencies or digital assets through funds or direct investments, and 42% increased their allocations in 2023.
- • 68% of institutions have or plan to invest in Bitcoin ETPs, while the share planning spot crypto exposure falls from 52% in last year's survey to 32% over a two-to-three-year horizon.
- • 50% of participants are interested in tokenized assets, with alternative funds (53%), public funds (46%) and real estate (38%) the most-desired categories.
- • Lack of regulatory clarity and a perceived shortage of trusted partners remain the key barriers to crypto and tokenization adoption, according to EY.
Summary
EY-Parthenon's second annual survey of institutional investors, conducted in March 2024, indicates that digital assets continue to gain positions in institutional portfolios. The survey covered 277 participants across institutional asset managers, asset owners, family offices and hedge funds. It was conducted after the SEC approved 11 spot Bitcoin exchange-traded products and when crypto market capitalization stood at about $2.3 trillion, according to EY.
EY reports that 94% of institutions believe in the long-term value of crypto, digital assets and/or blockchain technology. More than two-thirds already hold cryptocurrencies or digital assets through funds or direct investments. Forty-two percent increased allocations in 2023, and a little over half expect to raise allocations over the next two to three years. Allocations are concentrated in the 1%-5% range for 38% of institutions, with nearly half of family offices in that band. Hedge funds are more aggressive, with 22% allocating more than 5% of funds.
The survey shows a shift in how institutions prefer to access crypto. Spot crypto exposure is expected to decline from 37% of institutions today to 32% over two to three years, versus 52% who expected to invest in spot crypto in last year's survey. Registered vehicles appear to be driving this change: 51% plan to invest in mutual funds and ETPs holding crypto-related companies, 43% in vehicles owning underlying crypto assets, and 62% said they would prefer registered vehicles to spot crypto. EY attributes this to a preference for familiar, regulated products with confidence in liquidity.
Interest in tokenization is also growing. Half of institutions are interested in tokenized assets, citing portfolio diversification (65%), access to new asset types (58%) and greater liquidity (47%). Asset managers are less enthusiastic about tokenizing their own products, with 44% interested. Among those, alternative funds (66%), real estate (50%) and public funds (48%) are the leading candidates, and access to new capital (52%), cost savings (46%) and operational efficiencies (40%) are the main motivations. Partnering is the preferred route at 46%, versus 20% building internal infrastructure and 16% acquiring capability.
EY identifies regulatory clarity and a lack of trusted partners as the primary obstacles to growth. The firm expects further adoption as regulatory clarity develops globally. The article was published shortly before the SEC approved spot Ether ETPs in the US on May 23, 2024.
EY reports that 94% of institutions believe in the long-term value of crypto, digital assets and/or blockchain technology. More than two-thirds already hold cryptocurrencies or digital assets through funds or direct investments. Forty-two percent increased allocations in 2023, and a little over half expect to raise allocations over the next two to three years. Allocations are concentrated in the 1%-5% range for 38% of institutions, with nearly half of family offices in that band. Hedge funds are more aggressive, with 22% allocating more than 5% of funds.
The survey shows a shift in how institutions prefer to access crypto. Spot crypto exposure is expected to decline from 37% of institutions today to 32% over two to three years, versus 52% who expected to invest in spot crypto in last year's survey. Registered vehicles appear to be driving this change: 51% plan to invest in mutual funds and ETPs holding crypto-related companies, 43% in vehicles owning underlying crypto assets, and 62% said they would prefer registered vehicles to spot crypto. EY attributes this to a preference for familiar, regulated products with confidence in liquidity.
Interest in tokenization is also growing. Half of institutions are interested in tokenized assets, citing portfolio diversification (65%), access to new asset types (58%) and greater liquidity (47%). Asset managers are less enthusiastic about tokenizing their own products, with 44% interested. Among those, alternative funds (66%), real estate (50%) and public funds (48%) are the leading candidates, and access to new capital (52%), cost savings (46%) and operational efficiencies (40%) are the main motivations. Partnering is the preferred route at 46%, versus 20% building internal infrastructure and 16% acquiring capability.
EY identifies regulatory clarity and a lack of trusted partners as the primary obstacles to growth. The firm expects further adoption as regulatory clarity develops globally. The article was published shortly before the SEC approved spot Ether ETPs in the US on May 23, 2024.
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