Direct crypto investments trump crypto exchange-traded funds for global HNW investors, says GlobalData

As larger players such as Fidelity and Charles Schwab come round to the idea of cryptocurrency, they are typically introducing crypto exchange-traded funds (ETFs). However, high-net-worth (HNW) investors remain keen to go direct into the asset class, according to GlobalData, a leading data and analytics company.

Sergel Woldemichael, Senior Wealth Management Analyst at GlobalData, comments: “Cryptocurrency is highly volatile, so unsurprisingly, GlobalData’s 2022 Global Wealth Managers Survey found that the average global HNW portfolio holds just 1.4% in crypto. While demand is expected to grow going forward, investors are also unwilling to let cryptocurrency take up a sizable chunk of their portfolio.”

There are approximately 21,000 cryptocurrencies in circulation, according to CoinMarketCap, so investors are not short of options. Similar to other securities, going direct comes with the most risk (and thus the most reward). As a result, players both old and new are providing clients with a cushion via crypto funds or ETFs. ETFs also offer an added layer of security as investors are less likely to be hacked or lose their assets due to forgotten passwords.

Woldemichael continues: “Players focusing solely on crypto ETFs are missing out on the significant chunk of HNW crypto investors who prefer to go direct. GlobalData’s 2022 Global Wealth Managers Survey found that the lion’s share of HNW investors across all regions are conscious and aware of the risk that comes with investing in crypto and are happy to go direct as opposed to the safer option via funds. The potential of heightened returns is what pulls investors to the asset class; as it only takes up a small proportion of their portfolio, they are happy to take maximum risk.”

Providing clients with a wide investment range and choice is key for retention.

Woldemichael adds: “Although some wealth managers still question cryptocurrency and its longevity, customer demand has forced the hand of global players. For those that want to hold on to as much client wealth as possible, offering both a direct route into crypto investing as well as a fund option is essential.”

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