Are All Family Offices Investing In Crypto?

Are All Family Offices Investing In Crypto?

Every Family Office is now investing in Crypto.

Or at least, that’s what every media outlet will have you thinking. The truth is, there is a lot of talk about cryptocurrency but little action on the part of Family Offices. Their Principals, just like every other human reader out there, have been desperately trying their best to figure it out but rather than admitting defeat, it turns out, you no longer need to.

Family Office professionals from across the community are hanging up their suit jackets and titles to make money in crypto despite having no training, professional experience or expertise.

From day-trading to mining, it has never been easier for individuals to manage their own portfolios and make extraordinary returns without the capital often required. We have seen a surge in the number of exceptional candidates leaving their Family Offices behind to make three if not five times their compensation in Crypto, which is especially impressive when the average CEO brings home between $264,000 and $396,000 a year in basic salary alone.

There is however a risk and it is a substantial risk which is preventing Family Offices from taking the lead.

Any investment yields a risk of no return and often, a loss but for Family Offices, whose primary objectives are to preserve wealth and grow it steadily for generations to come, cryptocurrency is often a risk too high and so any headlines suggesting otherwise are often inflated or led by the few leaders who actually understand it.

To put this into perspective, most Principals who lead Family Offices with the objective of wealth preservation are often only comfortable with a small percentage of volatility. They also have fairly conservative benchmarks set for their return on investments which range between 7% and 10%. Their mature and measured take of volatility and return is a stark contrast to Cryptocurrency whose volatility is the price it pays for its limited supply and unpredictability.

Taking May 19th of this year as a prime example and Bitcoin plunged 30% to $30,000 as Ether dropped by more than 40% in 24 hours, plummeting below $2,000. Both bounced back by close of play but it was certainly a rollercoaster for all involved, especially for those Family Office Leaders who risk more than just a few thousands at a time.

While the ‘new’ asset class will age, allowing time for investors to learn a little more about what appeared to be just a trend some years ago, its volatility will never change and put simply, it is because it has a lot to do with a lot of things.

While social media, influencers and world news all impact the decisions we make in the world of investments, Twitter is often the springboard for change in the world of Cryptocurrency and this may-day madness came just minutes after China announced the crackdown on banks completing crypto transactions and the declaration-via-tweet that Tesla would no longer be taking Bitcoin as a means of payment. With leaders like Musk prone to changing the world with just a click of the button, cryptocurrency will always take high-risk, high-reward to another level. Some might even say out of this world but is there room for its uncertainty in a ring-fenced family portfolio?

Quite possibly. There has been a shift in risk appetite since the Coronavirus pandemic with 59% of Family Office Leaders now saying they are more prone to taking risk following COVID-19. 74% have also further diversified their portfolios and with the market-leading cryptocurrency’s price-per-token surging 113% year-to-date, it makes for an enticing read.

While Family Offices will not rush into any investment decision, they will approach cautiously and the only advice I can offer to those wanting to dip their toes in the digital water is to make your hires carefully and do not compromise.

It certainly will not be an easy task finding investment analysts, expert in crypto and equipped with the emotional intelligence, cultural awareness and loyalty required within the Family Office world but my parting message is that the two do not need to run mutually-exclusively if you look in the right place.

It starts with cultural fit and it ends with competency and understanding your own goals and objectives and where crypto might fit into your portfolio, office and family is a vital place to start.

For a more tailored conversation about your hiring or crypto strategy, please do not hesitate to reach out via all icons and platforms below and in the meantime, I’d love to hear your story. Will you take the risk if it means high reward?

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