Singapore family offices stay away from Bitcoin ETFs, prefer active bets
It’s still early days for Bitcoin ETFs [exchange traded funds] as an asset class in Asia, and the product is still navigating challenges in gaining broader acceptance with family offices, two family offices told AsianInvestor.
“I don't think that most family offices find Bitcoin ETFs to be exciting. It might only be interesting if you want to dip your toes in the [digital assets] water and get used to the volatility, but not if you are looking to take riskier bets on digital assets,” said Hayden Hughes, head of crypto investments at Evergreen Growth.
Evergreen Growth is a Singapore-based single-family office that has been actively investing in the digital assets space.
Bitcoin ETFs have garnered attention this year, with the US approving spot Bitcoin ETFs in January, followed by Hong Kong's launch of six spot Bitcoin and Ether ETFs in April.
Australia and Thailand have also approved Bitcoin ETFs, while regulators in Malaysia, South Korea, and Japan are increasingly exploring the asset.
According to Ken Chew, deputy CEO of Xin Family Office, also based in Singapore, there are two distinct approaches to digital assets among family offices in Asia.
“The passive nature of Bitcoin ETFs does not align with their preference for active management,” Chew noted.
For these family offices, investing in Bitcoin ETFs, even those from established firms like BlackRock, offers limited appeal since it primarily exposes them to only market risk, without the opportunity for active management.
“Larger family offices with sophisticated risk management strategies find this limited exposure unappealing. They seek more dynamic investment involvement, which Bitcoin ETFs do not provide,” added Chew.
Conversely, the second group of family offices views digital assets as too volatile and remains uninvolved in the asset class, making Bitcoin ETFs an unattractive option for them as well.
Also read: Asset owners sceptical about investing in crypto ETFs
LEADER OF THE PACK
For those active in the digital assets space, Bitcoin is also seen as a more established and stable asset compared to cryptocurrencies like Ethereum and Solana, which are seen as having higher growth potential.
“For family offices wanting to allocate a small percentage of their assets to take on riskier bets in the crypto space, Ethereum and Solana offer better chances of an upside potential than Bitcoin,” noted Hughes.
Over the next two years, there are expectations for the introduction of more cryptocurrency products and increased regulatory clarity, particularly from the United States.
This anticipated progress comes as the US debates new regulations under the Financial Innovation and Technology 21 (FIT21) framework, which aims to provide clearer guidelines on digital assets.
“This regulatory clarity is what many family offices are watching for — the ones that understand Ethereum and Solana,” Hayden added.
Also read: Singapore family office talks up potential of tokenisation
PROMISING GROWTH
Even though the market is still finding its feet, 13F filings — which are a good gauge of institutional interest in bitcoin ETFs — showed that interest is growing.
As of August 2024, Spot Bitcoin ETFs have attracted over $11 billion in assets, signalling growing institutional interest.
The SEC’s 13F filings, which institutional investors are required to submit quarterly, now include Bitcoin ETFs, enhancing transparency in Bitcoin ownership. According to Bitwise, institutional investors holding Bitcoin ETFs increased by 14% in Q2, reaching 1,100. Their share of Bitcoin ETF assets also grew from 18.74% to 21.15%.
Sovereign wealth funds are boosting their crypto investments. The Norwegian Sovereign Wealth Fund’s Bitcoin holdings surged 62% since December 31, 2023, reaching 2,446 BTC worth $142.9 million by mid-2024.
South Korea’s National Pension Service bought 24,500 shares of MicroStrategy for $33.75 million, as reported in August 2024.
For Hughes, the existence of a Bitcoin ETF is an indication of its success and acceptance by market participants.
“There’s no official government entity rating digital assets, so the Bitcoin ETF represents a form of validation. The ETF signifies that Bitcoin, at least as the top cryptocurrency by market cap, is here to stay,” he said.