IN FOCUS6-8 min read

Does bitcoin have a place in institutional multi-asset portfolios?

Many at first wrote bitcoin off as a short-lived novelty, but resilience and performance mean some are revisiting the cryptocurrency. Can bitcoin really take rank alongside traditional assets classes?

16/03/2021
bitcoin2
Read full reportDoes bitcoin have a place in institutional multi-asset portfolios?
4 pages405 KB

Authors

Xi Chen
Multi-asset Fund Manager
Ben Popatlal
Multi-Asset Strategist

Institutional investors have generally sat on the side lines during bitcoin’s fledgling ten years as an investable asset. In their role as fiduciaries for other people’s money, institutional investors have found it hard to justify investing in an unproven asset.

But bitcoin – and cryptoassets in general - continue to demand the world’s attention. Undoubtedly motivated by meteoric returns over the past year or so, institutional investors are considering whether it is time to get in on the action. 

Our stance 

In the multi-asset team at Schroders, we’re comfortable sitting out bitcoin’s adolescent years. We’re not seduced by the headline numbers, nor do we feel the need to be an early mover among asset managers. 

We do, however, think that bitcoin and its peers are worth seriously investigating. We’ve witnessed before how disruptive technology can be, and our approach to multi-asset investing is grounded in a humble acceptance of uncertainty about the future.

Traditional institutional investors are used to centralised, regulated asset markets, so it is understandable that an asset which plays by different rules can be scary. Fears of opaqueness and of bitcoin being used in illicit transactions are widespread in the traditional investment community. But the reticence of the institutional investor community to embrace cryptoassets is a ‘chicken-and-egg’ problem.

Institutional investors are waiting for cryptoassets to mature, but it is the process of organisations like ours embracing this new asset class that will lead to the professionalisation of the market. As more and more pieces of the puzzle fit into place – clarity around regulation, efficient access and liquidity, security assurances, the emergence of enduring use cases - we expect far greater institutional involvement in the asset class.

So, in this paper we lay out our take on a framework for institutional multi-asset investors to think about cryptoassets, using bitcoin as our focus.

Listen to Ben discussing bitcoin on The Investor Download podcast.

Bitcoin
Read full reportDoes bitcoin have a place in institutional multi-asset portfolios?
4 pages405 KB

Authors

Xi Chen
Multi-asset Fund Manager
Ben Popatlal
Multi-Asset Strategist

Topics

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