Ultra-rich and high net worth individuals (HNWI) have more than just their eyes on digital assets. According to a recent Capgemini survey, seven out of ten HNWI have invested in digital assets with many expressing that crypto is their chosen digital asset investment. This reflects a growing appetite in exploring beyond traditional sources of returns to grow generational wealth.
Too Big to be Ignored
Traditionally associated with investments in asset classes such as real estate, private wealth managers and family offices have taken notice of the associated opportunities of an emerging blockchain economy and Web 3.0, as a way to diversify their portfolios. Simply put, many recognize that not getting involved in digital assets means losing out not just on the financial opportunities but also on their mandate to preserve wealth and leave a legacy.
“The idea of family offices gaining exposure to risky, volatile digital assets may seem to go against their core values and investment philosophy, which prioritizes wealth preservation, traditional investments, and building a stable legacy portfolio that lasts across generations,” said Eugene Lim, Head of Private Wealth, Matrixport.
Particularly, as the baton of investment management is handed over to the next generation, the risk appetite and investment thesis are gradually evolving. Despite being inhibited by regulatory, licensing, and risk concerns, younger generational wealth owners are keen to gain exposure to and hold digital assets. According to Capgemini, 91% of HNWI less than 40 years old have investments in digital assets, unlike their predecessors.
Confluence of Fintech and Private Wealth
The generational shift in private wealth management seems to have found its testing ground in Singapore, a global fintech and wealth management hub. The island nation provides a conducive location for family offices to explore the emerging, alternative assets space while having a safety net of regulatory and infrastructural interventions which reduce risk-related concerns for them.
Aside from favorable tax treatment for HNWI in Singapore, the city state offers access to a comprehensive digital asset ecosystem, powered by pro-business government policies, all in one place. It gives the private wealth industry a unique opportunity to access a comprehensive suite of digital asset investment products offered by digital asset-native platforms, such as Matrixport, that understand the expectation and nuance of private wealth clients.
“Matrixport has innovated and reimagined investment products commonly used by HNW investors to benefit holders of digital assets. Our structured products use familiar options strategies to control market volatility for downside protection, or employ it as an advantage to generate enhanced yields,” added Eugene Lim.
Private wealth owners and managers find themselves now at a crossroads – whether to increase their portfolio allocations into the nascent digital assets industry, or stick to traditionally stable investments.
With Wall Street-like investment strategies overlaid on the underlying digital assets, asset managers expect family offices will be able to understand that the comparable risks in digital asset investment versus traditional asset management approaches are not that different. Such recognition is already made by traditional banks, such as JPMorgan Chase, Goldman Sachs, CitiGroup and UBS, who are making similar strides to launch digital asset teams, signaling that digital assets have indeed found their place in traditional portfolios.