Vast majority of endowment funds testing crypto investments

A survey conducted by Global Custodian, The TRADE Crypto and BitGo has shown that endowments are investing in crypto-assets and funds, with 94% stating they invested either directly or through a fund in 2018.

By Joe Parsons

Endowment funds have been allocating to crypto-related investments throughout 2018 and plan to continue their activity in the next year despite lingering concerns over regulation, volatility and liquidity.

According to a survey of 150 endowments conducted in Q4 2018 by Global Custodian and The TRADE Crypto in partnership with BitGo, 94% said they had invested in crypto-related initiatives in the past 12 months.

READ THE FULL REPORT: The institutional crypto backers:  How endowments are allocating to cryptocurrency investments.

Respondents acknowledged a number of factors still concerning them when it comes to the digita asset class, however only 7% said they anticipate a decrease in their allocations in the next 12 months.

The most prominent among their concerns were lack of robust market infrastructure, volatility, and regulatory concerns, followed by lack of liquidity.

“It’s fascinating to see that despite the widely-publicised concerns around regulation, custody and liquidity, endowments have been factoring crypto-related investments into their allocations, and very few are showing intentions of stepping away,” said Jonathan Watkins, managing editor, Global Custodian and The TRADE. “All the talk over the past 18 months has been around when institutional investors will begin participating in cryptocurrency investments, but it turns out they had already arrived, in the form of endowment funds.”

The vast majority of those surveyed (89%) were US-based, with the remainder in the UK and Canada. Respondents were primarily decision makers within their endowment with others playing an advisory or Board role.

Over half (54%) said this was through direct investment in individual crypto-assets, while 46% gained their exposure through funds of one kind or another.

The majority appear to see themselves as more adventurous in this regard than their industry peers. Asked if they expect the allocation to crypto investments by endowments in general to increase over the next 12 months, just under 50% said yes, while 45% expect allocations to hold steady.

Respondents acknowledged that to be considered investible by an endowment, a crypto-asset fund needed to exhibit certain characteristics, the top three mentioned being robust regulation, sufficient capital flow and liquidity, and account security.

Asked to sum up their experience with crypto-currency or crypto-asset investments, assessments from the endowments can be summarised as being cautiously optimistic. Despite one respondent describing their experience as “a very wild ride” and another as “hair-raising”, the most frequently responses cited “excitement” and “interest” around the digital asset class. “I think it is the future of investing,” said one respondent.

A full version of the report can be downloaded here.