Morgan Stanley Offering its Clients ‘Limited’ Access to Bitcoin, Bank’s Investor Note Suggests 2.5% Allocation

Only wealthier clients with “an aggressive risk tolerance” are allowed exposure. Also, the latest note says Bitcoin has reached the “threshold” of being an emerging investable asset class.

The latest step in Bitcoin’s institutional adoption is the investment giant Morgan Stanley becoming the first big US bank to offer its clients access to Bitcoin.

The bank with $4 trillion in client assets told its financial advisors Wednesday in an internal memo that Morgan Staley is launching access to three funds, enabling ownership of Bitcoin, reported CNBC citing people with direct knowledge of the matter.

The move was reportedly made after the banks’ clients demanded exposure to the cryptocurrency.

For now, Morgan Stanley is only allowing its wealthier clients, with at least $2 million in assets held by the firm and “an aggressive risk tolerance,” access to the trillion-dollar asset.

Even those accredited investors with brokerage accounts qualifying for this are limited to as much as 2.5% of their net worth, the people said. It also requires investment firms to have at least $5 million at the bank to qualify for this exposure and to be at least six months old.

Clients can be expected to make investments as early as next month once the training courses of the bank’s financial advisors are completed.

While this is the first time Morgan Stanley is directly offering its clients Bitcoin exposure, the bank itself has been involved in the crypto industry through investments. Just last week, it participated in the $200 million investment round of Stone Ridge Holdings’ subsidiary NYDIG along with New York Life, MassMutual, Soros Fund Management, and FS Investments.

It’s only the “Top of the first inning”

Interestingly, in its investor note date Wednesday by the bank’s wealth management unit, Morgan Stanley describes Bitcoin as an emerging investable asset class but still a speculative one.

“For speculative investment opportunities to rise to the level of an investable asset class that can play a role in diversified investment portfolios requires transformational progress on both the supply and demand sides. With cryptocurrency, we think that threshold is being reached,” wrote Lisa Shalett and Denny Galindo reported by TheBlock.

“A firming regulatory framework, deepening liquidity, availability of products, and growing investor interest — especially among institutional investors — have coalesced.”

While recommending investors to get educated on the trillion-dollar asset, Morgan Stanley notes how as with any asset class in its speculative phase, it involves risks; as such, having exposure in a small position is “prudent.” The bank’s initial modeling

“suggests diversification benefits from the low correlation of cryptocurrency to other assets and that Sharpe ratio improvements can be achieved with positions no greater than 2.5%. It is important to keep in mind that we are only in the top of the first inning.”

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