Family Offices Bet on Crypto for Risk Reduction

Family offices, which manage assets for wealthy families, are increasingly turning to cryptocurrencies like Bitcoin and Ethereum as a way to reduce risk in their portfolios. According to a recent survey by BNY Mellon, 74% of family offices are either invested in or actively exploring digital assets, nearly double the 39% reported in prior surveys.

The core argument for adding crypto exposure is based on its low correlation to traditional asset classes like equities and bonds. By incorporating an uncorrelated asset, even a volatile one, portfolio construction can smooth out overall returns.

A study found that adding just 3% crypto exposure to a standard 60/40 stock-and-bond portfolio elevated returns from 33.3% to 52.9% between April 2019 and March 2024.