Only of those surveyed at this winter’s said they expected to put money into crypto funds this year. The summits gather family offices, funds-of-hedge-funds, endowments, foundations, and sovereign wealth funds. At least one-quarter of those respondents were family offices.
Families and Funds
At least somebody’s listening, compared to a year ago.
For both fund managers and family office chief investment officers, a decision about investing in crypto often boils down to reputation.
“They love it intellectually, but when it comes to investing money they aren’t sure,” he tells ThirtyK.
Their caution is based partly on the fact that crypto, as a new asset class, “comes with an 80 percent variability of returns. It’s not something they are accustomed to seeing,” explains Kress, pointing to the 12 percent variability of stock funds based on the S&P 500 and of the 5 percent to 6 percent variability of bond funds.
Further complicating the risk equation is that managers of crypto funds tend to be young, which means managers for family offices are potentially via funds handled by new, unproven managers. Kress is finding that family offices that are willing to work with young fund managers tend to be most open to crypto as a category. The intersection of the two perspectives narrows the field to as few as a few dozen family offices, he says.
On the other hand, the shape-shifting industry offers chances for gains through currency arbitrage based specifically on the gaps in industry infrastructure, says Kress: “They are not that anxious to go long on crypto but they understand that there’s an opportunity to make money, if they participate in inefficiencies. Emerging asset classes have inefficiencies, like no central exchange, and lots of issues with exchanges.”
For both fund managers and family office chief investment officers, a decision about investing in crypto often boils down to reputation, he adds. In such a small industry, reputation reverberates loudly.
As uncertain as the crypto industry is within the U.S., it can appear to be a haven of stability for wealthy families located outside the U.S., Canada and Europe, adding yet another dimension for investment, says Robles. Families located in countries with “less-secure” banking systems are intrigued by the international and transparent aspects of crypto, “both from a speculation angle and also for the longer term,” he says.