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What’s changed (and why that matters)
After the 2022 washout, institutional adoption didn’t vanish; it reconstituted around better infrastructure and policy clarity. The emergence of regulated custody, spot exchange-traded products, stronger broker connectivity and real on-chain proof-of-reserves has turned digital assets from an operational headache into something wealth managers can diligence and monitor like any other asset class. Fidelity’s research traces this maturation - market plumbing, custody choices, and portfolio use-cases - alongside a steady uptick in institutional participation.
Just as importantly, the architecture for direct, segregated ownership has improved. Crypto Separately Managed Accounts (SMAs) marry discretionary management with qualified custody: assets are segregated at the wallet level, held with regulated custodians, and rebalanced under a traditional IM agreement. That preserves flexibility (tax-loss harvesting, broader asset lists, custom constraints) while keeping governance tight. It’s the digital-assets analogue of how private clients have held listed securities for decades.
Why exposure at all?
Three reasons a measured allocation can be rational for sophisticated families:
- Diversification: Correlations between bitcoin/ether and traditional assets have not been static, but over multi-year windows digital assets have behaved more like alternatives than equities, providing different sources of risk and return. That’s precisely the job alternatives are hired to do.
- Asymmetry: Return distributions are fat-tailed; a small position can move the needle if the technology diffuses further while downside is contained by sizing and discipline. Bitcoin has been among the top performers in multiple years, but with volatility that argues for position control and rebalancing rather than indiscriminate risk.
- Technological optionality: If tokenisation, scaling and new payment rails continue to embed into real finance, zero allocation becomes an active underweight.
How much, and where?
Sizing. For most UHNW principals, we advocate measured exposure, typically single-digit percentages, scaled to liquidity and tolerance for drawdowns, reviewed at each major market or life event. That keeps the portfolio robust if correlations spike and still captures upside if adoption accelerates. Fidelity’s long-running series (“Bitcoin First” and “Evolving Role”) argues for treating bitcoin distinctly within the sleeve and assessing its portfolio role on its own merits.
Implementation. There are three clean channels:
- Spot ETPs/ETFs in brokerage accounts: simple to hold and reconcile, with ordinary market-hours liquidity and product fees.
- Direct spot with third-party custody: potentially lower ongoing costs and access to a broader asset set (ETH, staking collateral, selected large-cap assets).
- SMAs: discretionary, segregated, rules-driven portfolios with custom constraints (jurisdiction, asset list, trading windows), enabling tax and reporting alignment.
SMAs preserve direct ownership and customisation - useful for families with specific governance or tax constraints - whilst ETPs maximise simplicity.
Governance first: custody, controls, reporting
Infrastructure is not a footnote. We set qualified custody with segregated wallets, multi-sig policies and insurance; we ensure signatory authority mirrors your foundation/trust documents; and we integrate positions into your consolidated reporting pack so risk is visible next to public markets and private equity. The SMA architecture described in the BitGo/Lionsoul paper reflects exactly this perimeter: regulated custody, auditable controls, and direct ownership under a discretionary mandate.
Risk management in practice
- Drawdown control: pre-set stop-levels and max position sizes, not just “buy and hope.”
- Rebalancing: calendar or band-based, so winners don’t dominate risk.
- Hedging: futures/options selectively for large mandates, matched to liquidity.
- Counterparty hygiene: exchange risk minimised; we prefer RFQ/OTC with settlement via custodian where possible.
- Policy discipline: clear rules on additions, stablecoins, staking, and what we won’t hold.
This is the difference between a hobby allocation and a professional sleeve.
What we will (and won’t) own
We start with BTC as the monetary asset in the stack, then consider ETH as a platform asset with yield mechanics (staking), and a brief list of large-cap, liquid names where there’s genuine network utility. The rest is case-by-case and sized accordingly.
The bottom line
Digital assets no longer require heroics to implement. With the right rails, they can sit inside a family’s wealth plan like any other alternative sleeve - small, deliberate, and reviewed to a cadence. The objective isn’t to chase fads; it’s to capture asymmetry and keep options open, without sacrificing sleep or governance.
