Half Of Goldman's Ultra Wealthy Clients Will Be Adding Crypto To Their Portfolio

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by Tyler Durden
Wednesday, Jul 21, 2021 - 01:00 PM

A recent analysis by CapGemini found that there are now a record 21 million millionaires in the world who hold a total $80 trillion in wealth among them. The number of millionaires grew by 7.6% in just the last year alone, despite - or rather thanks to - the coronavirus pandemic.

Some have said that if each of these high net worth individuals were to buy and hold just one bitcoin, there would be no more bitcoins in circulation. Of course, that can't possibly happen: we know that a handful of whale hold the vast majority of bitcoins. So much so that according to JPMorgan just 5% of the roughly 18.7 million bitcoin currently in circulation have actually changed hands in the past year, meaning that millions of bitcoin are held by a handful of accounts.

Naturally, we don't expect every millionaire in the world to want to own bitcoin... but many of those who don't currently will want some exposure. That's what Goldman Sachs found recently when a survey among its family office clients (read very reach clients) want to add digital currencies to their stable of investments.

Goldman found that just 15% of of the respondents in the survey — which polled more than 150 family offices worldwide — are already invested in cryptocurrencies (which is almost identical to how many Americans in total own crypto according to a recent survey released from Gemini.) But what is remarkable is that another 45% would be interested in diving into the space as a hedge for “higher inflation, prolonged low rates, and other macroeconomic developments following a year of unprecedented global monetary and fiscal stimulus."

Unlike hedge funds, family offices which manage the net worth of single individuals and/or their closest friends and family, are unregulated and have no obligations to diclose their holdings, something which Credit Suisse and Nomura learned the very hard way after the Archegos collapse. It also shows that while many hedge funds are loathe to admit they have an interest in buying cryptos - perhaps due to fears of spooking some of their more conservative LPs - family funds have no such qualms and are preparing to unleash a buying wave the likes of which the world has never before seen and will eclipse any retail buying interest observed in the past.

And yes: we are talking size - of the firms that participated in the survey, 22% had assets under management of $5 billion or more, and 45% oversaw $1 billion to $4.9 billion. In other words, two-thirds of family offices manage more than $1 billion and if just a half of these funds allocated a few basis points to bitcoin and ethereum which would amount to hundreds of billions in new capital... well, the sky's the limit.

According to Bloomberg, respondents in the survey also indicated interest investing in the “digital asset ecosystem.” The majority of families want to talk to us “about blockchain and digital ledger technology,” said Goldman's Meena Flynn, who helps lead private wealth management for the vampire squid which has been aggressively growing into the bitcoin space. There are many who think that “this technology is going to be as impactful as the internet has been from an efficiency and productivity perspective."

In other words, they are not only richer but far smarter than Paul Krugman, who of course hates bitcoin, calling it a "natural ponzi scheme."

Family offices have proliferated this century, partly due to the boom in tech billionaires. According to Bloomberg, more than 10,000 family offices globally manage the wealth of a single family, with at least half having started this century, according to EY. A 2019 estimate by researcher Campden Wealth valued family office assets at almost $6 trillion globally, larger than the entire hedge fund industry.

The firms vary markedly in size. Some manage hundreds of millions of dollars, while others oversee the fortunes of multi-billionaires such as Sergey Brin and Jeff Bezos. Many choose obscure names to operate out of the public eye. Alphabet Inc. founder Brin’s family office, Bayshore Global Management, gets its name from the location of the company’s headquarters. Charles and David Koch named theirs after the year their grandfather emigrated to America: 1888.

They’ve also surged in number across Asia following booming fortunes of the region’s ultra-wealthy, with China’s Jack Ma and real estate billionaire Wu Yajun both establishing their own family offices in the past decade. Meantime, members of the ultra-wealthy based outside Asia including Bridgewater Associates founder Ray Dalio are increasingly setting up branches of their family offices in the area.