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Asset managers eye long-term look of digital assets
Hong Kong at forefront of shift from conventional towards alternatives, data challenges remain
Yuki Li 10 May 2024

Amid the current volatile financial markets, global asset managers are taking measures to improve their performance and investors’ experience by shifting their attention from conventional asset classes towards infrastructure and alternative-type assets, according to a recent survey.

Currently, 59% of global asset managers manage infrastructure in their portfolio, which is the most popular asset class ahead of others like equity, fixed income, private equity, real estate, hedge funds and digital assets, finds the survey by US custody bank and investment manager Northern Trust.

However, nearly one-third of respondents are currently investing in digital assets; and when considering supporting new assets, more than half of managers surveyed say they would like to increase their allocation to digital assets.

“It is not surprising that digital assets are increasing,” says Caroline Higgins, head of global fund services for Asia-Pacific at Northern Trust. “And there is a shift towards longer-term investment in digital assets versus more short-term gains that we saw two years ago.”

Asia is at the forefront of digital asset development. Hong Kong, as the region’s digital asset hub, launched Asia’s first spot bitcoin and ether exchange-traded funds (ETFs) on Hong Kong Stock Exchange, which give both institutional and retail investors easy access to the most popular digital assets – cryptocurrencies.

Despite this, Hong Kong’s six new spot bitcoin and ether ETFs recorded over HK$87.5 million (US$11.2 million) in trading volume on their first trading day on April 30 – a figure that pales in comparison with the US$4.6 billion first-day volume for the 11 spot bitcoin ETFs launched in the United States in January this year.

Data challenges

With the emerging interest in digital assets, asset managers also face new challenges today, and data sourcing has become the predominant challenge when launching new products. Changing market structures like T+1 further complicate distribution efforts, according to the survey, making data sourcing even more crucial.

This can impact the investor experience as managers must be able to provide transparent and digestible insights to their investors. Many managers are looking to enhance their data management strategies by engaging with their custodians for outsourced solutions. They are also looking to new technologies, such as artificial intelligence (AI), generative AI and cloud adoption, to help address their data challenges.

Of asset managers surveyed, 57% say they intend to engage with specialized data service providers, while 55% aim to use new technologies like AI and machine learning to address data challenges within the next two years. Nearly 45% plan to engage a custodian for outsourced solutions.

 

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