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Asset owners sceptical about investing in crypto ETFs

Some asset owners remain cautious about Bitcoin spot ETFs, with uncertainties and mismatches still too significant to overlook, despite their appeal for an increasing number of family offices.
Asset owners sceptical about investing in crypto ETFs

Cryptocurrency exchange traded funds (ETFs), recently introduced in Hong Kong, hold too many caveats for most asset owners to invest in them, the audience heard at AsianInvestor’s Asia Investment Summit in Hong Kong on May 23.

Thijs Aaten
APG

“If we talk about cryptocurrencies, like Bitcoin, I struggle to find fundamental value. Then it becomes very much the greater fool theory -- if you can sell it to somebody at a higher price, you're making money. But that's very close to speculation. So no, it doesn't have a place in our portfolio at this moment in time,” Thijs Aaten, Asia chief executive officer at APG Asset Management, a Dutch pension fund manager, said.

Aaten highlighted that fiduciary duties and laws prevent APG from making investments based on speculation.

Kevin Liem, treasurer at Hong Kong Baptist University and chairing the university’s endowment and pension fund, also pointed to the fiduciary duty for his role as well.

Kevin Liem
Masan Capital

However, Liem is also managing director at family office manager Masan Capital, and cryptocurrency holds appeal for some family offices, although he emphasised that a generalisation could not be made.

“My observation is that in some family offices with younger principals, the majority of the assets are actually in crypto, and they have been doing very well in the past couple of years,” Liem said.

They also invest beyond the most known cryptocurrencies like Bitcoin and Ether.

EASIER WAY

He sees cryptocurrency ETFs as an entry for some investors keen to dip their toes in this new asset class.

“For the traditional investor, having a Bitcoin ETF does help them or provide an easier way to get exposure into this asset class, especially with the recently launched ETFs. That also allows flexibility to many investors as well,” said Liem.

Six cryptocurrency exchange traded funds (ETFs) were launched in Hong Kong on April 30, with three focusing on Bitcoin and another three on Ether.

The debuts marked the first launch of spot cryptocurrency ETFs in Asia and came three months after the first ETFs in the US to track spot Bitcoin were launched.

Also read: Market Views: Will HK's bitcoin ETFs spark institutional interest?

Still, most asset owners are sceptical about taking the first step, including Transamerica Life (Bermuda) Ltd.

Meimei Zheng
Transamerica Life (Bermuda)

"We do not have specific focus on this, and we might not have clear clues on crypto investment for now,” Meimei Zheng, associate director and investment strategist at the insurer, said.

ENERGY ISSUE

APG’s Aaten also pointed out that some cryptocurrencies require vast amounts of energy when they are digitally mined, for instance. This is also a major issue from a sustainability perspective.

“The Bitcoin network actually uses as much energy as an average European country, so I'm not sure if that's the most efficient way to pay for goods, and there's probably more sustainable ways of doing that,” Aaten said.

The spot cryptocurrency ETFs are investments that expose ordinary investors to the price moves of a specific cryptocurrency, like Bitcoin, and seek to give mainstream investors a regulated way to invest in cryptocurrency through their brokerage accounts. Investors pay management and brokerage fees for these investments.

Unlike a cryptocurrency futures ETF, a spot cryptocurrency ETF invests directly in the cryptocurrency as the underlying asset.

¬ Haymarket Media Limited. All rights reserved.
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