If you were to believe every headline about Family Offices and cryptocurrency, you would believe that 77% of Family Offices are interested in digital assets, that Family Offices own 4% of all cryptocurrencies and that 1% of all portfolios are allocated to cryptocurrency. You might also believe that Family Offices invested in cryptocurrency clear 40% return on investment every year.
At Agreus, we don’t believe the headlines you see every day and here’s why.
Family Offices at their very core are about wealth preservation. They are small entities created by wealth owners to both manage and preserve their family wealth for generations still to come and so they hire extraordinary investment teams to make calculated choices of where to invest their money based on precedent, research and risk.
Cryptocurrency as an asset class is extraordinarily volatile. Its highly technical requirements, poor reporting and stringent regulation in the likes of Singapore has not painted it as a favourable asset class, nor has its lack of precedent or high unpredictability.
That is not to say that Family Offices are not curious. Family Offices invested in bio and pharma technology in the masses during the pandemic and since the end, more than half of all Family Offices say their risk tolerance has increased. But while both of these realms alongside the likes of e-sports which also peaked Family Office interest recently, have a precedent with Family Office investors, cryptocurrency has not and we thought it was time to put a number on it.
In a bid to cut through all of the headlines about Family Office interest and intentions, we surveyed our Family Office network to determine how many Family Offices are actually invested in cryptocurrency today and the results speak for themselves.
Just one in five Family Offices are invested in cryptocurrency and for those invested, the allocation is extremely small.
Family Offices like precedent. In the last 12 months, they have increased their private equity investments by 63% and made more direct investments than ever before. They did so not because of a sudden urge to try something a little different but because they had experienced years of proven returns.
While cryptobillionaires exist, they are not frequent and where there are highs, there are extreme lows. Just last week, more than $275 billion was wiped off the value of the global crypto market in the space of 24 hours. While Family Offices have increased their comfortability with risk and must be content with a certain element of risk as is the case with all investments, this is not a level of risk that any Principal is comfortable with which is why just 20% of Family Offices are invested in crypto today and why a large portion of those are dipping their toes in the water, approaching very cautiously and carefully as Family Offices so often do.
Is your Family Office one of the 20% invested in cryptocurrency or are you, like many, steering clear?