Why Asian Family Offices Are Aping Into Digital Assets

Family offices in Asia are ramping up their exposure to digital assets to diversify portfolios and boost returns.

"What we are observing is a trend where family offices already invested in the industry are planning to increase their allocations," Zann Kwan, managing partner, and chief investment officer for Revo Digital Family Office, told DealStreetAsia.

"Those who have been on the sidelines are showing an increased interest in understanding how allocating to digital assets can potentially reduce portfolio risk or enhance their real returns."

Revo Digital Family Office is a digital family office and a distinguished member of Raffles Family Office.

Last September, Revo Digital Family Office, announced a significant investment from prominent entities including UOB Venture Management, Signum Capital, Gate.io exchange, and a notable Korean single-family office.

Digital asset holdings account for under 0.5% of the assets under management (AUM) of family offices in the Asia-Pacific region but 9% of these offices without current crypto holdings intend to venture into this asset class.

Brian Chan, group head of investment and products at Venture Smart Financial Holdings (VSFG), one of Hong Kong's Securities and Futures Commission-approved virtual asset managers, also told DealStreetAsia in an interview that Asian family offices are attracted to digital assets as liquid investments.

Crypto hedge funds have "garnered the most interest from family offices," Chan said. "It's not about crypto but more of the macro environment where family office investors are not willing to lock their money for too long."

"They now place greater emphasis on portfolio management and risk management needs, recognizing the potential benefits of incorporating digital assets as a strategic component of their investment strategy," Revo Digital Family Office's Kwan said.

Crypto venture capital, which is less liquid, saw a decrease in 2023, reaching a record low after dropping to one-third of VC investments in the previous year.

"Distributions have dropped significantly since last year, so available capital to recycle and reinvest has remained limited," explained Chew Min Wei, advisor of Singapore-headquartered multi-stage Web3 venture capital firm Arcane Group. "Additionally, allocators also have a choice of safe, high-yielding instruments while the interest rate environment remains high."

Bitcoin ETF hype is also spreading over to Asia with the Hong Kong arm of Chinese asset manager Harvest Fund Management submitting Hong Kong's first application for a spot Bitcoin ETF to the SFC. VSFG also recently announced plans to launch a spot Bitcoin ETF product in Hong Kong.

Chan highlighted that management fee is the key differentiator between these products.

"If you look at issuers in the U.S.," Chan said, "most of them are offering their products at a fee range of 0.2[%]-0.5%. When you compare that to CSOP and Samsung Asset Management's bitcoin futures ETFs, the management fees are 2% and 0.9% per annum, respectively."

"For spot ETFs, since there are relatively lower operating costs from a rollover perspective [compared to futures-based crypto ETFs]. It enables us to offer a more competitive product in terms of pricing," he said.

Chan is now eyeing Ethereum ETFs."Spot bitcoin ETF is only the first one," Chan said. "We hope to move faster and launch spot Ethereum ETF next. We plan to have multiple ETFs focusing on different assets."