DEFI INVESTMENT MOVES UP THE AGENDA FOR INSTITUTIONAL INVESTORS

(MENAFN- Perceptiona) According to new global research (1) by London-based Nickel Digital Asset Management (Nickel), Europe’s award-winning, regulated digital assets hedge fund manager founded by alumni of Bankers Trust, Goldman Sachs and JPMorgan, institutional investors and wealth managers are increasing their focus on decentralised finance (DeFi) investments.
Its study with institutional investors and wealth managers in the US, UK, Germany, Switzerland, Singapore, Brazil and the United Arab Emirates who collectively manage around $3.5 trillion in assets, found 81% believe investment opportunities in DeFi investments are becoming more attractive. Around a quarter (23%) questioned said investment opportunities in DeFi have become much more attractive.
The research also shows what the remaining barriers to engage with DeFi investments are for major institutional investors with liquidity, KYC and AML concerns seen as the major issues. Nearly half (47%) are concerned there is insufficient liquidity in DeFi investments for them to have an impact on operations and the same number raised KYC/AML concerns.
Around 44% pointed to a need for regulatory clarity before they engaged and 40% highlighted technology concerns while 37% cited a lack of safe custody solutions, and one in three (34%) are concerned about tax issues.
Wealth managers and pension funds are seen as the institutional investors most likely to dramatically increase their level of investment in DeFi. Nearly half (47%) believe wealth managers’ level of investment will dramatically increase while 46% say the same about pension funds.
Around 37% expect a dramatic increase in investment levels from sovereign wealth funds and 34% from hedge funds while 30% forecast a dramatic increase from family offices. The table below shows how investors expect levels of investment to change over the next three years.
INVESTOR GROUPS NUMBER EXPECTING DRAMATIC INCREASES IN LEVELS OF INVESTMENT NUMBER EXPECTING SLIGHT INCREASES IN LEVELS OF INVESTMENT NUMBER EXPECTING LEVELS OF INVESTMENT TO STAY THE SAME NUMBER EXPECTING LEVELS OF INVESTMENT TO DECREASE
DON’T KNOW
Wealth managers 47% 31% 18% 2% 2%
Pension funds 46% 29% 20% 3% 2%
Sovereign wealth funds 37% 46% 14% 3% -
Hedge funds 34% 46% 16% 2% 2%
Family offices 30% 46% 20% 3% 1%

Anatoly Crachilov, CEO and Founding Partner at Nickel Digital, said: “DeFi solutions demonstrated the resilience of decentralised applications during last year’s “mass extinction” of centralised entities. The market now increasingly recognises DeFi’s value proposition and the growth opportunities over the coming years”
“However, there remain barriers to wider engagement in DeFi with liquidity, KYC and AML concerns top of the agenda and these concerns will need to be addressed for institutions to engage on a broader scale. Nonetheless, these can be resolved, and Nickel has already steps to mitigate these risks in our operations and it would be great to see them gain wider adoption in the sector.”

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