Digital Asset Index Products

Report Summary

Index-linked, passive investment is set to dominate the 2020s. As an investment vehicle, passive investment strategies overtook active ones in terms of assets under management by the end of the last decade, reaching an all-time high of $4.2 trillion according to a recent Bloomberg report. There are two key drivers to this phenomenon. The first is that these financial products provide low-cost access to specific asset classes (e.g. S&P 500, gold and bitcoin trackers). The second is that it is an open question as to whether active strategies justify the higher management and performance fees on a risk-adjusted basis.

Digital assets as an investment vehicle are beginning to take on a broader scope. While in the past, native cryptoassets like bitcoin and ether were the only game in town, the future will see an increasing number of traditional assets represented in this segment. Fiat currencies will be represented in digital form, while bonds, equities and real estate assets are beginning to be tokenised as well. These dynamics mean that digital asset index products are set to grow in popularity as passive investing too.

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