Investing in Digital Assets as a Family Office
Family offices are starting to sprint into digital assets, also known as crypto, because the asset class has grown leaps and bounds recently. For instance, Bitcoin, a decentralized cryptocurrency on a Proof of Work blockchain and the largest cryptocurrency by market capitalization, was the best performing asset of the last decade, having cumulative gains from 2011-2021 that exceeded 20,000,000%. In second place was the Nasdaq 100 with cumulative gains of 541%. Meanwhile, gold’s cumulative gains were just 16.4% and the US Dollar was 4.8%.
Digital Assets Registered Investment Advisors
Family offices should find an experienced and knowledgeable registered investment advisor (RIA) to manage their digital assets portfolios. The blockchain and crypto market is relatively new, so it’s wise to find experienced professionals, just like you do with traditional investments like hedge funds and mutual funds.
Family Office Digital Assets Management Strategy
The most common digital assets strategies for family offices are digital assets funds, which are like regular hedge funds but they only invest in digital assets, and separately managed accounts (SMAs), which, unlike a fund, the family office has sole possession of all the assets in their account but gives the RIA trading permissions for the account.
Crypto Management for Family Offices
Along with family offices, accredited investors and institutional investors are getting into digital assets at a staggering rate. Most family offices are seeking exposure to the major crypto tokens—such as Bitcoin (BTC), Ethereum (ETH), Cardano (ADA), Cosmos (ATOM) and Binance Coin (BNB)—while some with a bigger risk tolerance are interested in crypto funds and decentralized finance (DeFi) because they get exposure to crypto as well as yield-bearing strategies, which are an easy way to hedge the market. Derivatives are another way to hedge the market.
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