As technology progresses, cutting-edge advances blend into our personal and professional lives. Gone are the days without tools like facial recognition, products like self-driving cars, and other innovations that once seemed far-fetched but have become increasingly familiar. Just like us, the investment landscape is no stranger to these changes. As these enhancements have integrated into our lifestyles, digital assets on wealth management platforms have risen in popularity and value.
Though items like photos, videos, written content, animations and more have been traditionally considered digital assets, newer types based on blockchain or similar technologies are finding their footing as a popular investment class in the asset management industry.
More and more, wealth management firms are exploring digital assets that provide direct or indirect access to crypto holdings, many through ETF lineups. Ultimately, these digital asset funds offer investors convenient exposure to crypto markets without requiring them to learn how digital assets operate, sign up for a cryptocurrency exchange or face the risks of owning digital assets directly. These funds also offer attractive diversification benefits, allowing investors to diversify their portfolios with alternatives and invest in an asset that could become increasingly profitable.
Since the Security Exchange Commission’s approval of bitcoin ETFs in January, major players in the industry have launched such products of their own and reaped the benefits, with the first 10 funds that invest directly in bitcoin sitting at a 53.5% median return within the first six months of availability. Firms like Invesco and iShares have seen the appeal, with both recently launching new digital asset offerings and corresponding promotional pages—Digital Asset Investing with Invesco ETFs and Access Ethereum, respectively—that position the products as means for accessing the benefits of digital assets while removing possible disadvantages.
More generally, as we consider the strategy’s entry into the mainstream and the public’s voracious appetite, Forbes poses the question, “Are alternative assets really ‘alternative’ anymore?” While alternatives experienced interest at the end of the global financial crisis in 2009 and into 2021 due to its higher yields and wider opportunity set, the asset class stayed an attractive option when further market volatility erupted following Russia’s 2022 invasion of Ukraine. More recently, hostilities between Israel and Hamas have intensified geopolitical tensions. With investors looking to mitigate risk and earn more consistent income and returns, portfolio diversification seems to be a reliable course of action, with investors continuing to increase allocations to alternatives over time.
Although access to alternatives has historically been limited to institutions and high-net-worth individuals due to high minimums as well as asset and income threshold requirements, firms are addressing the need to diversify. Many—like Invesco and iShares—are attempting to make this asset class more widely available through product innovation and access to institutional-quality managers.
It is important that wealth management firms also provide advisors with resources that help familiarize them with the less traditional digital asset classes and relevant strategies, preparing them for investor demand and the questions that come with it. Namely, professionals must stay updated on alternative benefits and risks as the market changes.
Firms may consider looking to competitors like Franklin Templeton for inspiration, which, at the beginning of 2024, launched a microsite dedicated to alternatives. In an attempt to bring down barriers to alternative investments, the firm uses the site to showcase its wide range of alternative strategies, such as private equity and private credit. The firm largely positions the microsite as an educational resource, offering a Glossary section at the bottom of the landing page as well as resources like a dedicated Knowledge Hub to provide an understanding of the alternatives market. Insights and courses for CE credit are available, offering basic practicums on the value of alternative investments and more granular lessons pertaining to individual strategies.
As a newer alternatives solution, digital assets require the same level of attention from wealth management firms. Invesco’s Digital Assets Education section from its newly launched page serves as a valuable example in the asset management space, featuring a collection of videos covering questions like, “What is bitcoin?” and, “What are common misconceptions of bitcoin?” to highlight key characteristics of digital assets and their importance in the future of finance. The firm commendably directs advisors to Galaxy’s Digital Assets Academy for video lectures, key takeaways, resources and interactive knowledge checks on valuable digital asset topics.
Offering similarly tailored resources not only enables investors to invest and diversify as they want; it also grants advisors the confidence to conduct, grow and change their business as the investment landscape does.
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Deirdre Kelshaw
Deirdre Kelshaw is an analyst on CI's asset management team.