The FINANCIAL — -New global research* from market-leading digital institutional investment platform VALK shows professional investors are increasingly focusing on cryptocurrency and digital assets as worries about stretched equity valuations and poor yields in the fixed income markets grow.
Its study among professional investors working in eight major economies for institutions holding more than $1 trillion in assets under management in total, found a third (33%) have invested in crypto assets for the first time recently while 55% have increased their allocation to crypto.
Almost all the investors questioned in the UK, US, France, Germany, Hong Kong, Singapore, Australia, and Brazil believe the strong performance of crypto asset class during the COVID-19 crisis has changed institutional views on the sector. More than half (53%) ‘strongly’ agree that digital assets are a viable asset class while 45% ‘slightly’ agree with this view.
The research for VALK, which has developed a unique Aggregator portfolio management system enabling institutions to manage their Decentralised Finance (DeFi) portfolio on one interface on a smart account and is due to launch it in January 2022, shows institutions are worried about equity valuations and fixed income yields.
Around 91% are concerned about stretched equity valuations with 48% saying they are very concerned, while 90% are worried about fixed income yields with 39% very worried. More than a fifth (22%) expect a dramatic increase in the number of investment grade bonds paying negative yields in the year ahead.
VALK’s Aggregator platform creates pools to act as a non-custodial portfolio management system for digital asset managers and funds and is an API for all protocols, connecting financial institutions to all crypto markets and enabling a variety of yield-generating strategies to be deployed.
In the next few weeks, VALK will launch MERLIN, a DeFi smart wallet that allows investors to monitor their DeFi positions. Integrated with protocols such as Compound and Aave, users will be able to connect their wallets using Metamask or just by pasting their address. MERLIN will help address one of the main obstacles preventing institutional access to DeFi, which is the difficulty in managing portfolios across multiple protocols. This can create several problems including difficulty in tracking any profit or loss made against initial investments.
Antoine Loth of VALK said: “The institutional investment switch to crypto and digital assets is well underway and the research highlights that with a third making their first investment recently.
“It’s a similar story in the wider DeFi market institutions increasingly dominating transactions with recent data** showing they accounted for 60% of all transactions in the sector in the second quarter of 2021.
“VALK’s aggregator is ideally suited to serve the growing institutional interest and bridges the gap between traditional financial institutions and DeFi, by solving current issues in the industry, including the regulatory landscape and security concerns surrounding DeFi.”
The research found confidence in the crypto sector among institutional sector is strong with more than half (54%) believing the total market capitalisation of cryptocurrencies will grow to $3 trillion or more by the end of next year compared to around $2 trillion now. By 2025 46% believe total market capitalisation will be $6 trillion or more.
The fast growth and success at VALK, which is backed by leading venture capital funds and strategic financial investors like SIX Group, Ascension Ventures and Metavallon, has been recognised by inclusion in the Financial Conduct Authority regulatory sandbox and Tech Nation’s Fintech 4.0,
It has won awards for its first technology solution which enables clients including investment banks, hedge funds, family offices, fund managers and asset managers to digitise processes and assets to become more profitable and target new opportunities through secondary trading and access to exchanges
The brainchild of founders Antoine Loth and Elie Azzi, VALK, which launched in 2019, aims to make global private markets digital and connected by offering a seamless end-to-end solution which improves processes and transforms how private transactions are conducted.
VALK has won Best Distributed Ledger Technology Project at the 2021 Sell-Side Technology Awards 2021 and was highly commended as Technology Provider of the Year at the 2021 Asset Management Awards. It has also been nominated for the FStech Awards.