Family offices, institutions eye sophisticated crypto strategies

The latest crypto bull market will be different from the last, as institutions and family offices opt for a fund of funds approach, market participants say.
Family offices, institutions eye sophisticated crypto strategies

An evolving interest in Hong Kong’s recently launched crypto exchange-traded funds (ETFs) from institutional investors and family offices is likely to be marked by an increasingly sophisticated investment approach, according to industry experts.

Brian Chan, chief investment officer at VSFG, a Hong Kong-based virtual asset manager, told AsianInvestor that family offices and institutional investors that had wanted single-deal, direct access to single tokens during the last bull run in 2022 were now changing strategies.

“This crypto bull run has come back quickly,” Chan says.“Previously family offices were asking us if there were any hedge funds or crypto VC funds that we could refer them to.

“This same batch of family offices has come back and said this time 'We don’t want to do a single type of hedge or venture fund' and are there any types of fund of funds that we could introduce them to.”


Traditional hedge fund managers, he said, might have worked in the industry for two decades before becoming portfolio managers, but in crypto an equivalent portfolio manager could be “a very good student at university.”

“From the family office perspective, they see a whole bunch of portfolio managers out there and they don’t have time to pick them, which is why they’re going for a fund of funds approach,” Bill Qian, chairman of Cypher Capital, told AsianInvestor.

Qian said the performance of Hong Kong’s spot Bitcoin and Ether ETFs were a sign that crypto was fast becoming a mainstream asset class.

Bill Qian
Cypher Capital

The existence of regulated ETFs for Bitcoin and Ethereum provides an implicit endorsement of these assets and that this legitimisation was attracting more conservative investors who might have been hesitant, according to Qian.

“The Hong Kong BTC ETF is going to be a very important innovation and a bridge that will bring institutional money into crypto,” he says. “The key bottleneck for institutions has been understanding and getting comfortable with crypto.”

Cypher Capital’s parent company, Phoenix Group, had set up the first Bitcoin mining joint venture with a sovereign wealth fund back in 2022, Qian said.

“After that we’ve begun to see more initiative from sovereign wealth funds that want crypto exposure,” Qian said. “Bitdeer, another Asian mining company, has set up a joint venture with another sovereign fund in Asia."


Hong Kong is uniquely placed to become a regional hub for crypto-ETF investment, he said, and while Hong Kong’s ETF market might not immediately compete with the US in terms of volume, it offers strategic advantages.

"I think the Hong Kong regulator really made a bold move regarding Ethereum ETF, which really earned them credit,” he said, referring to recent moves by Hong Kong to allow staking for exchange-traded funds investing directly in Ether.

The next move, he believes, will be a change in regulation that allows mainland Chinese investors, currently prevented from investing in crypto assets, to take part in the ETF market.

This accessibility, he said, would foster greater integration of crypto assets into the broader financial ecosystem in China.

"Technically, regarding accessibility, if a mainland China investor has the capability to invest offshore, they already have accessibility to US ETFs by default as well. Likely as not the Hong Kong ETFs, will be an add-on for them," Qian said.


In terms of product Innovation and development, Brian Chan of VSFG believes it will only be a matter of time before other crypto-related financial products, including spot ETFs and potential future products like Solana ETFs and stablecoins will be permitted by the Hong Kong regulator.

Brian Chan

Currently these layer-one tokens were actively reaching out to the Hong Kong SFC, Chan said, to open discussions “in terms of what exactly Solana is, for example.”

“As far as the stablecoin licence in Hong Kong is concerned right now, I know the deadline has just passed for applying for the sandbox,” he said, referring to the February deadline from the regulator.

“So if you look at the timeline now, it should give them enough time to conclude a sandbox study before an announcement ahead of Fintech Week.”

Chan said that many of Hong Kong’s fintech regulatory innovations were announced in the run-up to Fintech Week in late October/early November.

“Fintech Week is definitely the one to watch. Because of its semi-official status, it’s regarded as the safe space for the Hong Kong regulator to make important announcements,” he said.

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