With institutional demand for more actively managed cryptocurrency investments picking up steam, the asset management industry has begun to address the needs of this neglected space.
Abra, a crypto-focused wealth management platform, announced on Tuesday the launch of its asset management arm, Abra Capital Management. Abra’s original platform allows users — retail and institutional investors and asset managers — to trade and borrow crypto and earn interest on their crypto investments. Through ACM, Abra clients will gain access to five actively managed funds with exposure to a range of digital assets.
“There aren’t that many managers in the space right now,” Marissa Kim, a general partner and new leader of ACM, told Institutional Investor. “So we’re going to be part of this growing explosion of funds that are crypto-native and traditional asset managers [who] are jumping into the space.”
Before 2018, Kim said that the crypto sector was heavily focused on attracting retail investors. Since then, Kim said institutional investors have become more interested in digital assets, and this has allowed Abra, in particular, to grow its institutional client base. The launch of actively managed crypto strategies like Abra’s is a response to institutional investors who want something more than just a token exposure to crypto and who want to learn how to make the asset a significant part of their portfolios, Kim said.
“The first [signs of institutional interest] were about getting initial exposure to Bitcoin and Ethereum, either directly or through [passive products],” Kim said. “Now, the appetite is going beyond this initial exposure to differentiated strategies and [an attempt] to get more exposure to this growing asset class.”
Large pension plans like the Houston Firefighters’ Relief and Retirement Fund, for example, have announced crypto allocations. But most are still small. The Houston fund’s 2021 allocation to investments in Bitcoin and Ethereum comprised only 0.5 percent of its $5.2 billion portfolio, II previously reported.
ACM plans to root itself in five actively managed funds. Three of the funds will focus on “yield-generating opportunities in the crypto market for stablecoins, Bitcoin, and Ethereum,” while the remaining two funds will center on “early-stage token and equity investment opportunities,” according to the company.
The funds will invest in venture capital-backed companies, primarily those that are focused on developing early-stage Web3 products. Kim said the funds will largely invest in companies and projects that are still in the seed stage, where some nascent development may have taken place but no official launch has been announced.
“I think the largest growth is going to be in the venture capital strategy,” Kim said. “Whether it’s Web1, Web2, or Web3, anytime there’s a massive shift in how the internet is evolving, there’s a lot of interest in getting involved in these projects super, super early.”
Nevertheless, pensions, endowments and foundations have still been some of the slowest investors to adopt cryptocurrencies, according to a Fidelity survey of institutional investors featured in a Bridgewater paper in January. Out of the surveyed financial advisors, high net-worth individuals, and family offices, U.S. pensions and endowments accounted for the lowest crypto adoption rates.
Kim is confident, however, that these slow adoption rates will change — and quickly. “We're going to hit this tipping point in the next year or two where it will be a fireable offense not to have [crypto] exposure,” she said.