Alternative investments account for 12% of the high-net worth individuals’ (HNWI) investment portfolio in Asia-Pacific, with cryptocurrencies accounting for a mere 0.7% share, says GlobalData, a leading data and analytics company.
GlobalData had carried out ‘Global Wealth Managers Survey Q2 2021’ with 360 wealth management executives across 19 countries to gather their views on a variety of industry issues as well as their HNW clients’ attitude and behavior.
GlobalData’s HNW Asset Allocation Analytics, which explores HNWI’s portfolio composition, reveals that HNW investor segment in Asia-Pacific allocates a sizeable portion of investment towards high growth alternative investment products such as art and collectibles, private equity, and cryptocurrencies.
Siddharth Agarwal, Director of Financial Services at GlobalData, comments: “Despite the recent correction in bitcoin price by more than 60% in the last year, the cryptocurrency is still trading at 20-fold higher compared to the prices at the start of 2017. As a result, bitcoin and other cryptocurrencies have emerged as one of the popular alternative investment assets for high-risk modern investors in recent years.”
HNW investors across Asia-Pacific had gradually begun to include cryptocurrencies in their portfolio prior to the COVID-19 pandemic. However, the share of cryptocurrencies shot up in 2020 as the value of other asset classes declined.
“However, the share of cryptocurrencies in the portfolio composition of HNW individuals in Asia-Pacific has shrinked in 2021 as regulatory restrictions in some of the Asian countries materially affecting its desirability as an investment vehicle.”
Indeed, for one key group of Asia-Pacific investors cryptocurrencies have almost entirely been ruled out as an investment asset. China effectively banned all transactions in cryptocurrencies in September 2021. Its phased banning of crypto, arguably started in 2019, has choked off both a key source of demand for many currencies and a main center of mining to mint new coins.
The outright banning of transactions in all forms of crypto in China in 2022 clearly had an impact on HNW investment portfolio, with a notable decline in the overall share devoted to cryptocurrencies. Furthermore, the recovery in stock prices and optimism in the first half of 2021 also played a role. Higher stock prices have increased the share of equities in the HNW portfolio, already its largest component.
Agarwal concludes: “GlobalData predicts HNW investors in Asia-Pacific to load up on alternatives in 2022 to counter the impact of rising inflation. However, it is unlikely to materially boost the share of cryptocurrencies back to 2020 levels.”