Skip to content

CONTRIBUTORS

Max Gokhman, CFA

Deputy Chief Investment Officer
Franklin Templeton Investment Solutions

Lisa Wang, CFA

Head of Goals Based Solutions
Franklin Templeton Investment Solutions

Christopher Jensen

Research Analyst,
Data Science and Digital Lending Strategies

Tony Pecore,

SVP, Director of Digital Asset Management 

Introduction

Institutional investors have shown growing interest in digital assets but have remained cautious about allocating capital as the $3 trillion1 asset class continues to rapidly evolve.

This guide is designed to help institutional investors address common questions and considerations when starting to invest in digital assets. It covers the role of digital assets in an asset allocation, how to implement them in a portfolio, the various methods of gaining exposure and the operational considerations and stakeholder education necessary for successful integration.

Key topics include:

  • The role of digital assets in an institutional asset allocation.
  • Measuring the fundamental value of digital assets using traditional financial models.
  • Portfolio implementation and position sizing considerations.
  • Methods for establishing long-term capital market expectations for digital assets.
  • Ways of gaining exposure to digital assets, including direct ownership, digital asset ETPs, and actively-managed multi-token strategies.
  • Operational and stakeholder considerations, including resource requirements and effective stakeholder engagement.

Endnote

  1. Source: Coinmarketcap, Artemis, as of April 30, 2025.
     

FOR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR DISTRIBUTION TO THE PUBLIC.
 

WHAT ARE THE RISKS?

All investments involve risks, including possible loss of principal.

Blockchain and cryptocurrency investments are subject to various risks, including inability to develop digital asset applications or to capitalize on those applications, theft, loss or destruction of cryptographic keys, the possibility that digital asset technologies may never be fully implemented, cybersecurity risk, conflicting intellectual property claims and inconsistent and changing regulations. Speculative trading in bitcoins and other forms of cryptocurrencies, many of which have exhibited extreme price volatility, carries significant risk; an investor can lose the entire amount of their investment. Blockchain technology is a new and relatively untested technology and may never be implemented to a scale that provides identifiable benefits. If a cryptocurrency is deemed a security, it may be deemed to violate federal securities laws. There may be a limited or no secondary market for cryptocurrencies.

Digital assets are subject to risks relating to immature and rapidly developing technology, security vulnerabilities of this technology (such as theft, loss, or destruction of cryptographic keys), conflicting intellectual property claims, credit risk of digital asset exchanges, regulatory uncertainty, high volatility in their value/price, unclear acceptance by users and global marketplaces, and manipulation or fraud. Portfolio managers, service providers to the portfolios and other market participants increasingly depend on complex information technology and communications systems to conduct business functions. These systems are subject to a number of different threats or risks that could adversely affect the portfolio and their investors, despite the efforts of the portfolio managers and service providers to adopt technologies, processes and practices intended to mitigate these risks and protect the security of their computer systems, software, networks and other technology assets, as well as the confidentiality, integrity and availability of information belonging to the portfolios and their investors.

For investments in digital asset ETPs:

Digital assets represent a new and rapidly evolving industry. Due to the unregulated nature and lack of transparency surrounding the operations of digital asset exchanges, which may experience fraud, manipulation, security failures or operational problems, as well as the wider digital asset market, the value of digital assets may be adversely affected, causing losses to investors.

Digital asset markets in the US exist in a state of regulatory uncertainty, and adverse legislative or regulatory developments could significantly harm the value of certain digital assets, such as by banning, restricting or imposing onerous conditions or prohibitions on the use of tokens, mining activity, digital wallets, the provision of services related to trading and custodying digital assets, the operation of blockchain networks or the digital asset markets generally.

ETFs and ETPs trade like stocks, fluctuate in market value and may trade at prices above or below the ETFs/ETPs net asset value. Brokerage commissions and ETF/ETP expenses will reduce returns.

ETF/ETP shares may be bought or sold throughout the day at their market price, not their net asset value (NAV), on the exchange on which they are listed. Shares of ETFs/ETPs are tradable on secondary markets and may trade either at a premium or a discount to their NAV on the secondary market

For venture capital investments in cryptocurrency and blockchain companies: Cryptocurrency and blockchain companies are subject to various risks, including inability to develop digital asset applications or to capitalize on those applications, theft, loss or destruction of cryptographic keys, the possibility that digital asset technologies may never be fully implemented, cybersecurity risk, conflicting intellectual property claims and inconsistent and changing regulations.

IMPORTANT LEGAL INFORMATION

This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. This material may not be reproduced, distributed or published without prior written permission from Franklin Templeton.

The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as at publication date and may change without notice. The underlying assumptions and these views are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region or market. There is no assurance that any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets will be realized. The value of investments and the income from them can go down as well as up and you may not get back the full amount that you invested. Past performance is not necessarily indicative nor a guarantee of future performance. All investments involve risks, including possible loss of principal.

Any research and analysis contained in this material has been procured by Franklin Templeton for its own purposes and may be acted upon in that connection and, as such, is provided to you incidentally. Data from third party sources may have been used in the preparation of this material and Franklin Templeton ("FT") has not independently verified, validated or audited such data. Although information has been obtained from sources that Franklin Templeton believes to be reliable, no guarantee can be given as to its accuracy and such information may be incomplete or condensed and may be subject to change at any time without notice. The mention of any individual securities should neither constitute nor be construed as a recommendation to purchase, hold or sell any securities, and the information provided regarding such individual securities (if any) is not a sufficient basis upon which to make an investment decision. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments, opinions and analyses in the material is at the sole discretion of the user.

Franklin Templeton has environmental, social and governance (ESG) capabilities; however, not all strategies or products for a strategy consider “ESG” as part of their investment process.

Products, services and information may not be available in all jurisdictions and are offered outside the U.S. by other FT affiliates and/or their distributors as local laws and regulation permits. Please consult your own financial professional or Franklin Templeton institutional contact for further information on availability of products and services in your jurisdiction.

Issued in the U.S.: Franklin Resources, Inc. and its subsidiaries offer investment management services through multiple investment advisers registered with the SEC. Franklin Distributors, LLC and Putnam Retail Management LP, members FINRA/SIPC, are Franklin Templeton broker/dealers, which provide registered representative services.  Franklin Templeton, One Franklin Parkway, San Mateo, California 94403-1906, (800) DIAL BEN/342-5236, franklintempleton.com.

This site is intended only for U.S. Institutional Investors and Consultants. Using it means you agree to our Terms of Use.

If you would like information on Franklin Templeton’s retail mutual funds, please visit www.franklintempleton.com.

CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.