ETFs
Financial Advisors Still Looking for Bitcoin Spot ETFs: BlackRock CIO
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Despite the SEC’s historic approval of spot Bitcoin ETFs in January, most financial advisors are still determining how these new instruments will fit into their clients’ portfolios, according to ETF chief investment officer Samara Cohen. and index investing at BlackRock.
Cohen said that currently the primary buyers of spot Bitcoin ETFs are “self-directed investors” who manage their own investments through online brokerage accounts. Institutional investors like hedge funds and brokerage houses also participate, but registered investment advisors (RIAs) are embracing it cautiously.
The bottom line is Bitcoin’s historical price volatility, lack of long-term track record, and customer risk tolerance, Cohen noted. As an RIA, their role is to be particularly diligent in risk assessment and portfolio construction, which includes understanding and evaluating new asset classes like Bitcoin.
“This is the time to really highlight important data and risk analyses. [and determining] the role [Bitcoin] can play in a portfolio, what type of allocation is appropriate given an investor’s risk tolerance and liquidity needs, » said Cohen at Coinbase’s State of Crypto Summit this week.
“That’s what a counselor is supposed to do, so I think the journey we’re taking is exactly the right one and they’re doing their job,” she added.
For investors looking to invest in Bitcoin without having to manage the risks in two different ecosystems, spot Bitcoin ETFs constitute a bridge between crypto and traditional finance, according to Cohen. There were no good on-ramps into crypto before ETFs, she said.
Based on last quarter’s 13F filings, US spot Bitcoin ETFs attracted 937 professional firms in the first quarter of 2024. Major institutions that hold Bitcoin ETF shares include Millennium Management, Morgan Stanley, JPMorgan, UBS, Wells Fargo, and the State of Wisconsin Investment Board, to name a few.
Bitcoin adoption could be key to retaining future customers
Financial advisors with traditional, conservative clients remain hesitant or even avoid recommending Bitcoin ETFs to their clients.
Neither the firm nor its clients requested these ETFs, says Brian Sokolowski, founder and principal of Bluebird Wealth Management in Medfield, Massachusetts. He said his company’s clients are mostly seniors in their 50s and 60s who are nearing retirement.
“Some of our younger customers are proactively asking about crypto exposure, but for our core customer base, it’s not a priority.” said Sokolowski.
However, the trend may change over time as younger generations influence Bitcoin acceptance and financial institutions recognize its potential to attract future customers. Intergenerational wealth transfer is among the factors that could lead to wider adoption of Bitcoin among older adults.
Steve Cohen, the billionaire founder of hedge fund Point72 Asset Management, said in a meeting with CNBC in April that he owned some Bitcoin because of his son.
Bitcoin adoption is underway, but it’s “a slow journey,” according to Coinbase CFO Alesia Haas.
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