Institutional investors set sights on further diversification

Institutional investors are set to further diversify their portfolios over the next two years, according to a new international survey.

Fifty-three per cent of institutional investors and wealth managers based in the US, the UK, France, Germany and the UAE said they expect diversification to increase “dramatically” and an additional 40 per cent anticipate a slight increase.

The survey, commissioned by European digital assets investment manager Nickel Digital, also found that 42 per cent of professional investors were expected to dramatically increase their exposure to cryptocurrencies and digital assets in the next two years.

“This can partly be explained by the fact that many institutional investors are still testing the crypto assets/digital market and either have very small holdings here, or none at all,” Nickel Digital said.

A dramatic increase in exposure to private equity was expected by 36 per cent of the professional investors surveyed, followed by real estate with 32 per cent, infrastructure with 28 per cent and hedge funds with 23 per cent.

“The digitisation of the investment management sector has revolutionised the market in terms of the transparency around different asset classes and the investment strategies that can be developed,” said Fiona King, head of institutional sales at Nickel Digital.

“This, coupled with developments around alternative asset classes such as crypto assets, means the opportunities to diversify portfolios have never been greater.”

ARK Invest CEO Cathie Wood recently spoke on the potential for bitcoin’s price to significantly rise should institutional investors begin to take it more seriously.

“If institutions around the world were to allocate 5 per cent of their portfolios to bitcoin, that allocation alone … would add roughly US$500,000 to bitcoin’s price today,” Ms Wood told the CFA Societies Australia 2021 Australian Investment Conference last week.

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.