Wells Fargo to roll out crypto strategy for wealthy clients as attractive hedging option

• Wells Fargo Investment Institute has been diving deep into the research for offering reliable and safe crypto investment products for their clients.
• The president of the firm suggested that the crypto industry may be evolving into a more mature market.
• Bitcoin and altcoin prices differ from traditional markets in the long term and could offer an attractive hedging option for client portfolios.

Wells Fargo’s investment arm is creating crypto-related products for wealthy clients that are expected to roll out mid-year. 

Crypto as a viable investable asset

With nearly $2 trillion in assets, Wells Fargo Investment Institute will start offering crypto financial products to clients, as the company acknowledged that cryptocurrency is a “viable investable asset.”

The wealth manager has changed its course in terms of its take on the new asset class. During the 2021 outlook media briefing in December last year, the head of real asset strategy at the Institute stated that the team did not have any recommendations on crypto and even suggested that clients could not hold digital assets at the bank.

Over the past several months, Darrell Cronk, the President of Wells Fargo Investment Institute, stated that the firm researched the best solutions to offer reliable and safe investment products for their clients. The institute plans to evaluate and onboard an actively managed cryptocurrency strategy to its platform for qualified investors. 

Wells Fargo is now in the final stages of the research and due diligence process and plans to add the new strategy to the platform around mid-June. 

Cronk added that there had been “quite a bit of interest” in the crypto-related products, but clarity around the specifics of the strategy has not yet been revealed. 

Given the rise in the value of digital currencies such as Bitcoin over the past year, Cronk suggested that this could be a sign of the industry’s maturity. He explained:

We think the cryptocurrency space has just kind of hit an evolution and maturation of its development that allows it now to be a viable investable asset.

Cronk sees digital currencies as an evolving asset that requires deeper due diligence and categorizes it as an alternative investment rather than a “strategic allocation.” He further clarified:

There's a whole element of consumer protections and regulations that have to still evolve with the changing landscape. So we're not without risk, it's just that we think there can be a viable investable option for those clients who show an interest.

Wells Fargo Investment Institute further published research on the correlation between cryptocurrencies with stocks and commodities. According to the analysis, while cryptos appear to be tied to the traditional financial markets on a short-term basis, the link is weaker on a longer time frame. 

Since digital asset prices differ from traditional equity and commodity markets in the long term, the new asset class can be an attractive hedging opportunity for any portfolio.