Notwithstanding recent precipitous falls in the prices of both backed and unbacked cryptocurrencies and repeated warnings from Andrew Bailey, the governor of the Bank of England (BoE), about the failings and fallibilities of this asset class, wealth managers will face growing pressure to offer crypto and digital-related advice and investment vehicles as part of their service offer.
This is the major finding of a survey commissioned by London-based Nickel Digital Asset Management, which claims to be Europe’s largest regulated digital assets hedge fund manager.
Nickel commissioned research with 200 professional investors from across seven countries who collectively manage around $329 billion in assets.
Sixty nine percent said wealth managers will come under increasing pressure from clients to cover crypto and digital assets over the next two years. Twenty three percent expect clients to place considerably more pressure on them to do this.
Only 23 percent of those surveyed expect the pressure on wealth managers to cover crypto and digital asset services to fall, with seven percent predicting their clients will opt for direct market access bypassing their wealth managers.
More than three-quarters (78 percent) of professional investors believe wealth managers will lose clients if they choose not to offer advice around crypto and digital assets or access to funds investing in them.
“The number of sophisticated retail investors is increasing dramatically, and they are becoming more demanding in terms of the service and support they want from wealth managers and advisers,” said Fiona King, Nickel Digital’s managing director in charge of institutional sales.
“Our research shows that those wealth managers who choose to ignore the multi-trillion dollar digital asset market run the risk of losing clients. The pressure on wealth managers to offer advice and funds on the market will only grow as the digital asset sector develops.”
Nickel Digital commissioned the market research company Pureprofile to interview 100 wealth managers and 100 institutional investors across the US, UK, Germany, Israel, Switzerland, UAE and Brazil in March 2022.
Founded by former traders at some of the world’s best-known investment banks, Nickel Digital offers a range of digital asset-related products for institutional investors.
It says its mission is to provide a gateway for traditional investors into the digital assets market across a broad range of risk profiles.
The firm runs a range of systematic strategies that focus on the digital assets market, including market-neutral arbitrage and multi-strategy funds.
It has also developed a range of directional solutions that aim to capture the structural expansion of the digital assets market.
Nickel Digital currently has four funds that invest in digital assets.
Its market-neutral Digital Asset Arbitrage Fund pursues an absolute return strategy to exploit market inefficiencies, price dislocations, and volatility swings to deliver consistent returns within a strictly defined risk management framework.
The fund generated returns of 15 percent in 2021.
Since its inception in 2019 monthly returns have been positive over 90 percent of the time with volatility of 3.4 percent and a Sharpe ratio of 3.1 percent.
Nickel Digital’s Diversified Alpha Fund is a non-directional multi-strategy fund that wraps a portfolio of strategies such as statistical arbitrage, relative value and volatility arbitrage into a single, investible fund.
The firm says that the fund protected capital well in May 2020, delivering a record monthly performance of 4.7 percent despite the underlying market going through one of the strongest corrections in recent years.
It returned 17 percent in 2021 with volatility of 6.9 percent and a Sharpe ratio of 2.7 percent.
Nickel Digital’s third pooled vehicle, the DeFi Liquid Venture Fund is designed to capture the growth potential of the broader digital assets universe outside Bitcoin, spotting early winners in Layer 1 protocols and decentralised finance, the area of greatest financial innovation.
It has generated returns of 28 percent since its inception in mid-March 2021.
Nickel’s Digital Gold Institutional Fund, a Bitcoin tracker, claims to provide secure, efficient, transparent, and liquid access to physically allocated Bitcoin.
The firm says it delivers institutional-grade precision of trade execution available seven days a week with one of the sector’s lowest expense ratios. it returned 67 percent in 2021, in line with the underlying Bitcoin market.
