Institutional funds in Germany would be able to allocate a portion of their portfolio into crypto-assets, following a new law that would take effect in August.
Institutional Funds to Hold up to a Fifth of their Assets in Crypto
According to Bloomberg on Friday (July 30, 2021), The Fund Allocation Act would come into effect on August 2, 2021. The law allows Spezialfonds (special funds) to allocate a maximum of 20 percent of their portfolios in bitcoin and other cryptocurrencies.
Spezialfonds are German investment vehicles limited to institutional investors such as pension funds, insurance firms, that manage a whopping 1.8 trillion euros ($2.1 trillion). If these Spezialfonds decided to allocate all the 20 percent, that would see an inflow of €360 billion ($428 billion) into cryptocurrency.
While this development would signal a boost for the crypto market, some experts, however, believe that German investors may not yet be open to investing in crypto, because of its volatile nature According to Kamil Kaczmarski, financial services adviser for consultancy firm Oliver Wyman LLC, some of the funds may not put up to 20 percent of their portfolio in bitcoin and crypto for at least five years.
Also, an expert on cryptocurrency at the German Investment Fund Association (BVI), Tim Kreutzmann, said:
“Most funds will initially stay well below the 20% mark. On the one hand, institutional investors such as insurers have strict regulatory requirements for their investment strategies. And on the other hand, they must also want to invest in crypto.”
German financial institutions have also reacted to the development. A spokesperson for DWS Group, the asset manager of the multinational investment bank Deutsche Bank, said there were no immediate plans to offer funds that buy cryptocurrency. Major asset manager DekaBank, also said that it was still considering making crypto investments.
Growing Institutional Interest
Institutional appetite for crypto appears to no longer be a developing trend but an established fact with banks and financial institutions now helping to onboard more big-money players into the crypto space.
As previously reported by BTCManager, Zeno Staub, CEO of Swiss banking giant Vontobel revealed that the firm’s institutional clients were showing a significant appetite for cryptocurrency exposure.
Wall Street bank JPMorgan has even announced its intention to create a virtual currency investment product for its wealthy clients.