A survey commissioned by WisdomTree, sponsor of ETF (exchange-traded fund) and ETP (exchange-traded product) products, revealed that Italians think that cryptocurrencies can be used in portfolios as unrelated assets for diversification. . In addition, more than nine out of ten Italian consultants (94%) have talked to their clients about investments in cryptocurrencies and a fifth of clients (21%) are willing to focus on this asset class by investing outside the consultancy relationship. . The survey, conducted by CoreData Research, an independent research agency, involved 600 professional investors from across Europe, from wholesale financial advisory firms to wealth managers and family offices. Investors interviewed manage a volume of assets amounting to approximately 400 billion euros. Although the regulatory framework certainly creates an environment full of challenges for Italian financial advisors and their clients, regulation at the moment, while being among the factors considered as an obstacle, is not considered the greatest barrier to allocation on this asset class. 32% of Italian consultants said that the lack of intrinsic value is the most common reason why they decided not to invest in cryptocurrencies on a professional basis. For Italian financial advisors, two other more common barriers are the absence of regulation (30%) and volatility (28%), both considered a major obstacle to allocating capital to digital assets. In the last few years, awareness of digital currencies and investments in this new asset class has grown. Many professional investors today are aware of the role digital assets can play within a portfolio. For example, 16% of Italian consultants believe that cryptocurrencies can be used as a hedge against disturbances in the global financial system and almost half (47%) of Italian consultants believe that an allocation on cryptocurrencies in the order of 1- 2%.Jason Guthrie (photo), Head of Digital Assets, Europe at WisdomTree, said, “Cryptocurrencies are a young asset class and can fulfill different roles in different portfolios. Categorizing all assets in the same way is limiting, as by doing so, the specificities and different possible ways of using them within a portfolio of individual currencies are neglected: for example, mega cap coins such as bitcoin and ether are very different from wide range of altcoins available in the market. Despite the volatility we have seen this year, the demand for digital assets has not declined and advisors need to be one step ahead to ensure client portfolios are managed effectively and investment risks are minimized “.
When asked about risk appetite since the start of the Covid-19 pandemic, nearly half (47%) of consultants across Europe said their clients are looking for riskier investments, perhaps driven by the rise in inflation and low interest rates. In Italy, 33% said risk appetite remained unchanged, while 46% noted an increase in demand for riskier investments. As the cryptocurrency market is experiencing significant volatility in 2021, it has become increasingly important for consultants to have access to research and educational material to support clients.
Jason concluded by saying: “Advisors in the EU provide access to cryptocurrency ETPs, although this still poses a challenge for most financial advisors. Investing through ETP products allows exposure to the underlying assets without the investor having to manage their public and private keys. Therefore, customers need not worry about storing coins in digital wallets and will have easier access to educational and advisory materials. If a client is willing to invest outside the consulting relationship, the best thing a consultant can do is to keep up to date on the asset class and be a guide for the client on the journey to cryptocurrencies, as doing so will reduce capital risk to a minimum.
