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Iconic Funds and Cryptology study finds adding cryptocurrencies increases the Sharpe ratio

To gain a deeper understanding of the impact of cryptocurrencies on investment portfolios, Iconic Funds and Cryptology AG have conducted a study investigating different portfolio structures, with particular focus on the following investment models: a traditional stock/ bond portfolio (with weights of 50/50 and 80/20), a balanced portfolio (stocks/ bonds/ real estate/ gold/ commodities), an endowment model portfolio; a family office/ high net worth individual’s portfolio and a pension fund portfolio.

The firm writes that the report conclusively shows that the addition of cryptocurrencies generally increased the Sharpe ratio of a given portfolio, considering that in all cases a continual increase in the Sharpe ratio was observed. In relative terms, the Sharpe ratio increased the most for all portfolios when moving from a 1 per cent crypto allocation to a 3 per cent crypto allocation. This evidences that a comparatively small holding of cryptocurrencies can significantly improve a portfolio’s performance, the authors say.

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