Cambridge Associates, a pensions and endowments consultant with $389 billion in assets under advisement, has stated institutional investors should start exploring the crypto space.
“In looking across the investment landscape, we see an industry that is developing, not faltering,” they say. “Although the crypto industry remains in its infancy, we think institutional investors should begin exploring it.”
They recommend that no more than 1% is invested either directly into cryptos like bitcoin and eth, into ICOs or STOs, or otherwise indirectly into crypto/blockchain companies.
“The vast majority of institutional investors have little to no cryptoasset exposure,” they say. “We expect traditional venture capital funds to increase their investments in cryptoassets going forward, meaning institutional investor exposure is also likely to rise.”
In a somewhat detailed statement they explain the potential different crypto investment strategies, highlighting institutional investors can not invest more than 20% in non-qualifying investments (i.e., investments in digital assets).
“Still, the industry is nascent and an allocation of more than 1% of a portfolio on a look-through basis does not appear prudent, even for those comfortable assuming the very high risks involved,” they say.
The 46 years old US based advisory has changed its tune after it told institutional investors to stay away from cryptos at the height of the 2017 bubble:
“In our opinion, institutional investors are better served focusing on investing in companies seeking to profit from the development and adoption of blockchain technology and ‘fintech’ (financial technology) more broadly than holding cryptocurrencies directly,” they said in November 2017.
Now they’re implicitly recommending a diversification to cryptos of no more than 1% of holdings after studying the crypto space.
A number of university endowments have also dipped their toes into cryptos, with the infrastructure continuing to develop for institutional crypto investments.