Cryptoassets are becoming a conversation starter for retail investors. Several weeks ago, the Financial Conduct Authority (FCA) found that 2.3 million Brits aged over 18 hold cryptoassets.
It also found that only 38% of Brits consider them a gamble.
But is this the attitude that retail investors should have about the asset class?
Andrew Hardy, investment director at Momentum Global Investment Management (MGIM), said to International Adviser: “I think we probably will see crypto becoming more prevalent in portfolios and more products launching, because performance has been so remarkable and it’s becoming a little bit self-fulfilling.
“Bitcoin and the like have now got a very substantial market cap because they have performed so well and therefore demand attention.
“We’re not investing in bitcoin. We think it’s highly speculative and requires a lot of further proof in order to live up to the expectations that people are putting on it. For example, there are expectations that it can be a future primary currency for transactions, but it’s not even close to the likes of Visa and MasterCard in terms of processing speed and efficiency.
“Liquidity is very challenging and it’s exceptionally volatile. And there’s the argument about being a so-called store of value, where it can protect against inflation because supply is limited. But there’s enough different cryptocurrencies out there, so how is supply that limited?
“There’re a lot of challenges out there and maybe it is it right for investors to buy cryptocurrencies at this point, and maybe they will continue to go up, but we will only know that over the course of time. I think with the amount of uncertainty around it and the short history, I don’t see how you can categorise it as anything but speculative.
“Speculative is not bad, that’s fine as we have to speculate at times in making investment decisions, but people using it as a store of value or relying on it as a defensive investment or a diversifier are guessing as there’s little to no basis for that.”
Institutional-like investments
Alongside cryptoassets, retail investors are starting to look at traditionally institutional investments like private equity and private assets.
But Hardy believes these are “really difficult for retail investors”.
“That’s one of the areas where we can genuinely add value,” he added. “Availability of product is not great and it’s just the sort of area where you need to do a lot of due diligence to know what you’re getting into.
“This is very difficult to do, in terms of getting the information in the first place, but also for advisers to be able to dedicate enough time and resources to doing that properly.
“We’ve got a 20 strong investment team, we’ve got the same number of people in terms of operations and compliance behind that as well, that can help with enhanced operational due diligence. Realistically that’s our role to play.
“It’s increasingly important to try and make sure that you’ve got exposure to those areas, or you’ve got options and the partners available to give you access to that, because the fact is that many companies are staying private for longer and longer.
“Just focusing on listed stocks, you’re missing out on loads of opportunities overall, and particularly of late that’s included many of the highest growth businesses, operating in new or rapidly evolving industries.”
