Asia’s family offices increase focus on digital assets amid growing market interest

Family offices in Asia are increasingly focusing on digital assets, with many planning to increase their investments in this sector.

According to a Feb. 19 article from Nikkei Asia, Zann Kwan, the managing partner and chief investment officer at Revo Digital Family Office, has highlighted a growing trend among family offices in crypto.

The changing strategy aims to diversify portfolios and potentially improve returns, covering both direct and indirect investments in cryptocurrencies, crypto funds, structured products, and direct private equity investments.

The article added that despite digital assets constituting less than 0.5% of the total assets under management in Asia-Pacific family offices, there is a noticeable trend. It cited another report by Campden Wealth and Raffles Family Office, which revealed a growing interest in cryptocurrencies. About 9% of family offices without current crypto investments are planning to venture into this asset class.

The interest towards digital assets has been reinforced by significant price increases in cryptocurrencies such as bitcoin and ether in 2023.

During that time, bitcoin’s value has surged over 160%, reaching a market cap of over $1 trillion for the first time since December 2021. Additionally, the approval of the first U.S.-listed spot bitcoin exchange-traded funds (ETFs) in January was a major milestone, expanding investment avenues for both institutional and retail investors.

Furthermore, Hong Kong has been proactive in regulating digital assets, readying itself for applications for virtual asset (VA) spot ETFs, potentially making it the first Asian market to introduce such products. Despite these positive developments, macroeconomic challenges and geopolitical tensions have led to a cautious investment stance among Asian family offices.

The report also cited Brian Chan from Venture Smart Financial Holdings (VSFG), who reported an interest in liquid investments, particularly crypto hedge funds, as family offices seek flexibility in the current economic climate. This comes as the crypto hedge fund sector has shown signs of bouncing back from the difficulties it faced in 2022. There was a significant increase in the industry’s assets under management towards the end of 2023, highlighting a renewed interest in investments in digital assets.

Conversely, crypto venture capital activity saw a downturn in 2023, with investments falling to a third of the previous year’s levels. This shift has led to a dominance of passive investment products in the crypto fund market, indicating a strategic pivot towards more stable, lower-risk investment options.

Meanwhile, blockchain development in Asia continues to grow, with recent approvals for the merger of Layer-1 blockchains Klaytn and Finschia. This merger aims to establish a comprehensive web3 ecosystem in the region, involving over 45 companies, 420 decentralized applications (dApps) and services, and over 250 million wallet users.