Institutional investors are expected to boost investments in crypto, as digital assets are increasingly viewed as a promising asset class, according to a report.

Commissioned by crypto exchange OKX, the Economist Impact research brief noted that institutional investors intend to ramp up portfolio allocations to crypto through several investment strategies.

“Digital assets are becoming increasingly interesting to institutional investors,” the report said, adding that cryptocurrencies such as bitcoin and ether, non-fungible tokens and tokenised private funds and securities like bonds and stocks are proving particularly attractive.

Citing an earlier global survey, the report noted that more than half (51%) of investors were looking into spot crypto allocations, while 33% were considering staking of digital assets and 32% were interested in crypto derivatives.

Around 69% were considering increasing their allocations to digital assets and/or related products in the next two to three years.

Currently, average allocations are typically between 1% and 5%, and this is expected to increase to 7.2% by 2027, the report said.

“From venture capital and pension funds to crypto hedge funds, there is a growing consensus among institutional investors that digital assets, including cryptocurrencies, have an important place in asset allocation,” the report said.

Allocations, however, can vary. Companies that have larger assets under management (AUM) currently allocate lesser shares, while around 6% of firms with AUM greater than $500 billion allocate between 5% and 10%, compared with 34% of firms with AUM under $50 billion.

“The majority of portfolios will increasingly incorporate some form of digital assets as real-world assets become tokenised. Most securities, bonds and central bank digital currencies will all be on the blockchain moving forward,” noted Ataf Ahmed, Chief Executive of Graphene Investments.

“Digital assets are rapidly being adopted in investment portfolios,” noted Lennix Lai, Chief Commercial Officer of OKX.

“The trend will only intensify if we see advancements in blockchain technology, enhanced regulatory clarity and uptake of innovative digital solutions like tokenised real-world assets.”

(Writing by Cleofe Maceda; editing by Seban Scaria) seban.scaria@lseg.com