Crypto interest surges among alternative investment allocators

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Laxman Pai, Opalesque Asia:

Forty-one percent of alternative investment allocators said they expect their firms to increase allocations to cryptocurrencies and other digital assets this year said a survey.

According to the 2022 Alternative Investment Allocator Survey, conducted by leading law firm Seward & Kissel, direct fund investments remained the most popular, with 93% of respondents allocating directly into a commingled fund, up from 86% last year.

The second annual survey analyzes the views of individuals from pension funds, endowments, family offices, seeders, high-net-worth individuals, and other entities. Their increased interest in digital assets is reflected not only in their expectations for future allocations but also in current holdings.

Last year, nearly 70% of survey participants said they did not invest in digital assets; this year, that number was down to 48%.

Of the different methods that allocators use to invest funds, co-investment vehicles, including special purpose vehicles (SPVs), surged this year, with 38% of participants using them compared to 28% last year.

The survey also found that investors continue to allocate to emerging managers. Nearly three-quarters (73%) of survey participants indicated that their organizations invest in alternative investment managers founded less than two years ago, representing an overwhelming majority.

Also consistent with 2021 is the appetite for illiquid strategies, which continued to draw significant allocation interest. Meanwhile, in addition to the growing interest in digital assets, large numbers of survey participants expected their organizations to increase allocations to infrastructure (44%) and private equity (41%) strategies. Also selected by more than 30% of respondents as areas of increasing allocations were private debt, private equity real estate, and hedge funds (equities).

Across all asset classes, the survey showed that allocators are also focused on operational due diligence, with 72% ranking background checks and references as “very important” in conducting their business.