In boardrooms from Singapore to Seoul, family offices are reconsidering their stance on digital assets. “When family offices or institutional investors allocate to Bitcoin, they do it as a part of their alternatives sleeve,” said Joshua Choo, Director of Wealth Advisory at Lighthouse Canton, speaking to Lighthouse Canton IDEAs: Views & Insights. “They want something market neutral—something where, whether Bitcoin goes up or down, it still generates a fixed return.”
Lighthouse Canton is working closely with investors to demystify crypto and structured strategies, focusing particularly on market-neutral strategies that mimic hedge fund playbooks. These include basis arbitrage, lending yield strategies, and newer trend-following techniques—all designed to extract value regardless of crypto’s price swings.
The narrative is gaining traction.
According to PwC’s 6th annual global crypto hedge fund report released in October 2024, nearly half (47%) of traditional hedge funds surveyed this year have exposure to digital assets—up from 29% in 2023—driven by increased regulatory clarity and the launch of spot cryptocurrency ETFs in Asia and the US. Market-neutral strategies, in particular, are increasingly favoured for their ability to manage risk while still seeking returns in the highly volatile digital asset space.
Choo noted that while crypto may still be viewed as an “outsider” asset class by some, that perception is starting to shift—driven not just by curiosity, but also by the asset class’s evolving risk-return profile. “Some of the market neutral crypto strategies aren’t fundamentally new,” he said. “They’re familiar structures in a new asset class.”
STRATEGIES IN DEMAND
Among Lighthouse Canton’s clients, the most widely adopted approach is basis arbitrage—a classic hedge fund strategy adapted to crypto. This involves buying Bitcoin at the current price while selling it at a future price to lock in the difference as profit. Investors buy Bitcoin in the spot market and short Bitcoin futures, profiting as the two prices converge over time. “You buy the physical Bitcoin and short the Bitcoin future. So technically, it’s a hedged position. But the future has a carry,” Choo explained. “We get about 80 to 300 basis points on that trade.” Even in less favourable years, it holds up. “On a year when the crypto market is down, such strategies can potentially still return about 8% per annum,” he added.
A second popular approach is stablecoin lending. Here, investors earn passive income by lending out digital cash (like USDC or USDT) to platforms that need liquidity for trading. Investors lend out stablecoins to crypto prime brokerages in exchange for yield. These brokers then use the funds for margin trading and rebate a portion of the fees back to the lenders. “They charge a percentage on margin trading, and they rebate quite a bit of it to whoever lends them the assets,” Choo said. While it carries less directional market exposure, it introduces additional counterparty and smart contract risk, which investors must be willing to understand and monitor.
The third and more recent addition is CTA-style trend-following strategies—momentum-based models that trade based on price trends, regardless of market direction. These algorithmic strategies aim to profit from price movement patterns, whether the market is rising, falling, or moving sideways. “These are similar to momentum-driven trades in traditional finance,” Choo said. “They make money in up, down, or range-bound markets. By adding a 5–10% allocation to these CTA trend strategies as part of a multi-strategy approach, we can plug the flat spots of other market-neutral strategies to create a more robust all-weather crypto portfolio.”
To keep pace with evolving opportunities and inefficiencies in the crypto markets, Choo and his team are focused on maintaining a multi-strategy market-neutral portfolio, actively adjusted according to prevailing market dynamics.
“As crypto markets become more efficient over the next three to five years, the yield generated by current strategies will gradually decline,” Choo said. “That’s why we’re continuously evolving and adding new strategies like CTA models to stay ahead.”
THE DIGITAL ASSET JOURNEY OF A FAMILY OFFICE
The rising interest in digital assets follows a typical adoption arc. “The typical journey starts with interest in general exposure to Bitcoin and Ethereum,” Choo said. “They just want exposure to the crypto market. If they see Bitcoin go up, they want to make money.”
As that interest matures, clients explore beta-driven coins such as Solana, which are more volatile than Bitcoin. Eventually, they discover structured strategies. “Then they move toward other coins like Solana, and finally into structured strategies—because once they hear about market neutral, they prefer it,” he added.
What makes these strategies appealing is how they align with family office expectations. “The very standard family office requirement is 8 to 10% per annum for trad-fi allocations,” Choo explained. “They can take some illiquidity, but they don’t like to see risk. That’s it.”
Interestingly, demand is being driven not by CIOs or gatekeepers but by the principals themselves. “It’s not the gatekeeper pushing for crypto,” Choo shared. “The demand is driven by the principal. Gatekeepers typically want to stick to what they know and don’t want the complications of a new asset class.”
And yet, across Asia, the tone is shifting.
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“We’re seeing more openness from single-family offices this year to take a fresh look at Bitcoin,” Choo said. “The conversations always begin with basic exposure, but they evolve quickly once the strategies are explained properly.”
Still, bridging the knowledge gap remains essential.
“Most family offices, if they like the strategy, don’t fully understand the risks,” Choo said. “That’s why education and trust in the investment manager are critical—especially when gatekeepers are hesitant to champion this asset class.”
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