Wells Fargo is planning to adopt an actively managed cryptocurrency strategy for qualified investors, according to Wells Fargo Investment Institute President Darrell Cronk.
The investment research division of Wells Fargo Wealth & Investment Management has been looking into “a professionally managed solution” for months. However, it has now reached the final stages of the manager research and due diligence process. According to Cronk, the strategy will likely be added to the platform by mid-June.
As one of the largest wealth managers in the United States, Wells Fargo Wealth & Investment Management oversees nearly $2 trillion in assets.
Cronk’s perspective
Although previously wary of integrating cryptocurrencies, Cronk says the space has evolved and matured enough “to be a viable investable asset.” He said the 9,000 cryptocurrencies that add up to over $2 trillion in market value illustrated this point.
However, Cronk believes that crypto may not be for everybody. “We’re still not suggesting in our work that it is its own dedicated asset class with a strategic allocation to it in every portfolio,” he said. He also emphasized that crypto is still evolving as an asset, considering it as an “alternative investment.” Any investment therefore requires deeper due diligence.
Still, Cronk noted that crypto would “be a nice diversifier to portfolio holdings,” for interested qualified investors. Additionally, he cited “good academic and money management work,” surrounding cryptocurrencies. He believes people will become more familiar with them, and their price will naturally go up as a consequence.
This belief in its eventual mainstream adoption is also qualified by cryptocurrencies’ steadily declining volatility. Wells Fargo analysts noted that annualized volatility in a cryptocurrency index they created was 160% between July 2010 and August 2015. However, this fell by half to 80% between August 2017 and March 2021, according to their report.
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