- UK asset manager, Hargreaves Lansdown, has warned against investing in Bitcoin, arguing it’s “not an asset class” and it’s too volatile to be worth holding.
- The firm said cryptocurrencies have no intrinsic value, but still plans to offer some clients exposure to digital assets through exchange-traded notes (similar to ETFs).
- The wider asset management industry is split over crypto, with some like BlackRock embracing it while others like Hargreaves Lansdown and Elliot Management remain more cautious.
UK investing giant Hargreaves Lansdown has cautioned that cryptocurrency, including Bitcoin, isn’t actually an asset class and is too risky to form part of any investing portfolio, in a statement published on its website last week.
The HL Investment view is that bitcoin is not an asset class, and we do not think cryptocurrency has characteristics that mean it should be included in portfolios for growth or income and shouldn’t be relied upon to help clients meet their financial goals.
Hargreaves LansdownThe firm added that “performance assumptions are not possible to analyse for crypto” and, uniquely among investment options, crypto has no intrinsic value.
Despite this strident criticism, Hargreaves Lansdown remains happy to offer cryptocurrency investments to its clients through crypto-based exchange-traded notes (ETNs), which are similar to exchange traded funds (ETFs).
“HL will offer appropriate clients to trade in cryptocurrency ETNs early next year following careful development of the client journey and appropriateness assessment,” the company said.
Because the crypto ETNs are considered higher risk investments, only those clients deemed by Hargreaves Lansdown to have “sufficient knowledge and experience” will be able to invest in them. The total amount clients can invest in the ETNs may also be limited to 10% of their total portfolio.
Other conditions on the ETNs offered to Hargreaves Lansdown’s clients will include that they must be traded on UK-based stock exchanges, and they must be physically backed by the underlying cryptocurrency.
Related: Arthur Hayes Declares the End of Bitcoin’s Four-Year Cycle, Citing Monetary Forces Over Halving Hype
Investment Industry Remains Split on Crypto
Hargreaves Lansdown’s criticism of crypto comes after several other large asset managers recently questioned its inherent value and sustainability.
Last week, Deutsche Bank claimed that “Bitcoin is backed by nothing.” However, despite this, the firm also predicted that central banks around the world will be clamoring to build stockpiles of the original cryptocurrency by 2030.
Related: Deutsche Bank Predicts Central Banks Will Hold Bitcoin and Gold as Core Reserves by 2030
Similarly, asset management firm Elliot Management reportedly sent a letter to its clients last week warning crypto has “no substance” and is likely to blow up catastrophically, potentially wreaking “havoc in ways we cannot yet anticipate.”
On the other hand, several large asset managers have warmed to crypto in recent years. The world’s largest asset management firm, BlackRock, has embraced crypto after previously being staunchly opposed, and now offers several crypto ETFs. If you believe Larry Fink, BlackRock’s CEO, this change came about because he finally understood cryptocurrency. Fink now says crypto is a “legit asset class” and has a place in a well-balanced portfolio.
Even Jamie Dimon, CEO of JP Morgan, and the man who once referred to Bitcoin as a “pet rock” has softened his stance, saying at an investor day in May that JP Morgan would now allow customers to invest in Bitcoin, though it would still refuse to hold the cryptocurrency on their behalf.
“We are going to allow you to buy it. We’re not going to custody it. We’re going to put it in statements for clients,” Dimon said.
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