Last year, Germany introduced the Fund Localization Act, which allows specific funds – ‘spezialfonds’ (special open-ended national AIFs with fixed investment conditions) – to allocate up to 20% of their assets under management to crypto/digital assets.
New research based in London Nickel Digital Asset ManagementEurope’s largest regulated digital asset hedge fund manager, found that 30% of wealth managers, pension funds and other institutional investors expect more than half of Spezialfonds in Germany allocate digital or crypto assets over the next two years.
In the long term, 78% of respondents expect them to allocate over $100 billion in crypto and digital assets – at least 5% of their combined assets, which amount to approximately $2 trillion. That’s a pretty big flow of new capital into cryptocurrencies if Nickel is right.
Fiona King, Managing Director of Institutional Sales at Nickel Digital, said: “Germany has moved quickly to legitimize digital assets, and the passage of the Funds Tracing Act last year is just one example. . Germany has taken a head start in adopting the new asset class. Our research shows that professional investors expect Spezialfonds to capitalize on the fund localization law and start allocating digital and crypto assets. This will provide strong new approval for digital and crypto assets and drive more professional investors to allocate to this new asset class for the first time or increase their existing exposure.
Survey of 200 professional investors from seven countries, including Germany, who collectively manage approximately $329 billion in assets, finds 30% believe between 25% and 50% of Spezialfonds will allocate digital and crypto assets by 2024. Only 14% expect less than 10% of these funds to do so.
Cryptocurrency is seen as a new and quite revolutionary topic in the traditionally conservative world of German asset management. However, it is becoming apparent that there is a growing appetite among professional investors in the country for some level of exposure to digital assets. However, this is unlikely to be an indiscriminate kick on Bitcoin, but rather a more measured approach.
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Spezialfonds and the law on the location of funds
The fund location law states that Spezialfonds can allocate up to 20% of its assets to digital and crypto assets, and 22% of professional investors surveyed by Nickel Digital believe they will allocate less than 5% in the longer term. Some 19% think they will allocate between 2% and 5%, but 78% expect them to allocate a higher percentage of their portfolios to digital and crypto assets.
The legislation came into force in Germany in August last year. The expectation within German fund management circles – for example the country’s investment fund association – is that most institutional players will stay well below the now permitted band. The German regulator, BaFin, has said that investors should always proceed with caution when it comes to investing in digital assets, although it encourages the development of blockchain in the country.
“We are convinced that digital assets, of which cryptocurrencies are only a part, create a new class of assets that will establish themselves in the portfolios of institutional investors over the long term”, Daniel Andemeskelhead of innovation management at Universal Investment and managing director of UI Enlyte, IPE Pension Funds Magazine told IPE.
Unlike the UK, Germany allows ETCs to be listed which, in turn, can contain cryptocurrencies.
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Can the German Spezialfonds Industry Save the Cryptocurrency Market? – Tech Tribune France
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