‘We never lost interest’: Asian family offices buy into crypto

Family offices in Asia are buying into cryptocurrencies, despite months of market turmoil, as weak returns from their traditional portfolios make digital assets attractive.

The interest from investment managers suggests there are still new buyers of cryptocurrencies such as bitcoin and ether, after a boom in digital asset prices in 2020 and 2021 turned into a bust.

Several family offices and wealthy individuals in Hong Kong said this year’s decline in digital asset prices had to be set against the poor performance of local stock and property markets.

After experiencing volatility in the first half of the year, cryptocurrency prices have recently plateaued, leading to speculation as to whether they have bottomed out. Investors said the assets remained an attractive hedge against broader market movements.

“We never lost interest in [crypto],” said Keith Wong, managing director of Winland Wealth Management, a Hong Kong-based multifamily office. “We see it as diversification and an asset class of its own.”

A survey of 30 family offices and wealthy investors in Hong Kong and Singapore, published by KPMG China and crypto group Aspen Digital on Monday, found that 92 percent of respondents were interested in digital assets, with 58 percent already invested and 34 percent planning to do so.

More than 60 per cent of respondents were family offices or individuals managing assets worth between $10mn and $500mn, the report said.

Bitcoin, the world’s largest cryptocurrency, has fallen about 70 percent from its peak in November 2021 and has been trading between $18,000 and $25,000 since June. Ether, the second largest coin by market capitalization, is down around 60 percent so far this year.

However, Hong Kong’s traditional asset classes have also suffered this year, with the city’s shares underperforming US and European stocks. The benchmark Hang Seng index is down more than 30 percent this year, hit by geopolitical tensions and repeated Covid-19 shutdowns in mainland China.

The city’s housing market has sunk to its lowest level since the 2008 financial crisis after years of coronavirus restrictions and subsequent interest rate hikes.

“Everyone [my] friends with family offices say they have switched. . . into other things like having an art portfolio. . . and cryptocurrencies too,” said a wealthy Hong Kong investor, adding that the property sector had been “really stagnant”.

The focus on family offices comes as crypto companies in Hong Kong lobby regulators on licensing requirements that take effect in March. The industry fears that the rules will prevent access to retail investors.

“For the average high net worth individual . . . whatever people recommended in gold, you can cut it in half and allocate half of your precious metal to crypto, because it’s an easy way to hedge, says Eric Wong, CEO of Bricks and Mortar Management, a Hong Kong -based multi-family office.

Hong Kong-based Raffles Family Office has set up a joint venture with crypto company Huobi Tech to serve the “unmet” needs of ultra-wealthy families looking to invest in digital assets. C Capital, the asset manager founded by Hong Kong tycoon Adrian Cheng, plans to raise around $200 million to invest in blockchain assets over the next 18 months.

Digital assets are facing a generational divide, advisers said, with crypto companies eager to use “old money” from individuals more resistant to the new asset class.

“For example . . . the other day I was sitting with a family . . . the parents don’t know anything about crypto, and the kids are asking about it,” Winland Wealth’s Wong said.

In the long term, this generational dynamic will bring more crypto buyers “from the older side of the population pyramid,” said Bricks and Mortar’s Wong.