While interest was piqued, 401k advisors at a recent industry gathering had trouble fully grasping digital developments just over the horizon, blockchain and cryptocurrencies being two examples.
A new announcement from Fidelity Investments thankfully limits the damage done from a lack of understanding, but is it only a matter of time before plan sponsors and participants can jump aboard?
The Boston-based firm, which also happens to be the nation’s largest retirement plan record keeper, has announced a new digital assets division (read cryptocurrencies).
Fidelity, with an astronomical $7.2 trillion in client assets, said it will offer the custody and trade execution services to sophisticated institutional investors such as hedge funds, family offices and market intermediaries.
“Our goal is to make digitally-native assets, such as bitcoin, more accessible to investors,” Fidelity chairman and CEO Abigail Johnson said in a statement. “We expect to continue investing and experimenting, over the long-term, with ways to make this emerging asset class easier for our clients to understand and use.”
“We started exploring blockchain and digital assets several years ago, and those efforts have been successful in helping us understand and advance our thinking around cryptocurrencies,” added Tom Jessop, head of Fidelity Digital Assets. “The creation of Fidelity Digital Assets is the first step in a long-term vision to create a full-service enterprise-grade platform for digital assets.”
While there are many retail service providers in the digital assets space today, there is a gap in support for institutions, the company claims.
Citing Greenwich Associates data, it notes a “paradox” has been created, in that 70 percent of institutional finance executives believe cryptocurrencies will have a place in the future of the industry, yet many firms are waiting on the sidelines to enter this market.
In a recent survey, Fidelity also found that 70 percent of institutional investors said that new asset classes will likely emerge because of advancing technologies, such as blockchain.
“With the rise of interest in digital currencies and various use cases, institutional investors—such as hedge funds, family offices and market intermediaries—look to enter the market for a number of reasons,” it concluded. “Whether it’s the rising popularity as a store of value or relative non-correlation to the broader market, the potential to power lower-cost global payments, or the emergence of protocols that could power new industries, institutional investors are interested in engaging with this new asset class.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
