University endowments – perhaps the ultimate balanced, institutional investors – grew a not-too-shabby average of 11% in the latest fiscal year, according to a new study. That said, the three academic institutions that outperformed the average had a pair of outsized investments in common: artificial intelligence (AI) and digital assets.
The three universities that posted higher than 11% growth in the latest fiscal year were the University of Michigan (15.5%), Massachusetts Institute of Technology (14.8%), and Stanford University (14.3%), according to new research from portfolio analysis software company MPI.
So if that’s the lesson, should more advisors be going to school on AI and crypto?
James Vermillion, founder of Vermillion Private Wealth, for one, says he started investing in AI-related companies well before the current surge in excitement, going back to his firm’s founding in 2020. In his view, AI is clearly a transformative, long-term theme, but “positioning” is everything.
“Valuations are stretched, and plenty of companies are using ‘AI’ as a marketing term rather than a core capability. In some ways, it feels a lot like the dot-com era. The internet did change the world, but many companies with ‘dotcom’ in the name didn’t survive,” Vermillion said, adding that he’s optimistic about AI’s future, but cautions investors to be “selective and price-sensitive.”
Meanwhile, Randol Curtis, chief investment officer at Thryve Wealth Management, wholeheartedly believes AI is changing the business landscape and as a result is featuring it prominently in his portfolios.
“From software companies to tech hardware to electrical infrastructure, our portfolios stand to benefit broadly from the operational efficiency and capability that AI brings to different sectors and companies,” Curtis said.
Likewise, he says digital assets, particularly Bitcoin, represent an important investment theme for his clients as a long-term store of value and hedge against the debasement of fiat currency.
Michael Reynolds, principal at Elevation Financial, has seen a “slight uptick” in clients interested in greater exposure to AI and digital assets. When it comes to AI, Reynolds says he tries to steer clients toward diversification by explaining that the broad equity funds they are already invested in give them quite a bit of exposure to AI related companies.
“This generally helps them feel comfortable that they are not missing out on the AI boom,” Reynolds said.
When it comes to digital assets, he is encouraging clients to think about anywhere from a 1% to a 5% exposure in digital assets depending on their financial situation and risk profile.
“I view crypto as both a way to enhance performance and to provide greater diversification in portfolios,” Reynolds said.
According to Vermillion, a lot of the obvious public-market plays have already been bid up, which shifts the opportunity set toward private markets, niche funds, and what he calls “second-order beneficiaries,” or companies quietly using AI to make their own operations more efficient. In his view, venture exposure can make sense for investors with experience, long time horizons, and high-risk tolerance.
“We don’t have to be early to every breakthrough to benefit from it. Apple didn’t invent the internet; it built on it years later and created immense value by redefining how people interacted with it. AI will follow a similar pattern. Its impact will reach far beyond today’s headline names,” Vermillion said.
Thryve’s Curtis focuses on public equities and private equity firms where he can participate in the value creation driven by AI, but also remain within his investment circle of competence and control risk. Except in limited cases, he does not invest in hedge funds.
“The valuation of public equities has risen over the past few months, but in the long-run, we feel they are very well positioned to perform and participate in the fruits of the AI revolution,” Curtis said.
Many digital assets have been driven by speculation, poor governance, or outright fraud. So far Bitcoin stands apart and has survived real stress tests.
That said, Bitcoin means different things to different people, according to Vermillion.
“Some view it as a technology, others as a store of value, a hedge against currency debasement, or just a speculative trade. When clients bring it up, the first question I ask is 'why?'
"Their motivation matters. For some investors, an allocation can make sense, usually through a regulated ETF. For others, it’s simply not a good fit,” Vermillion said.
Direct ownership adds security and custody risks in his opinion, while indirect exposure is simpler but less pure.
“The ‘right’ approach depends on an individual’s goals, conviction, and tolerance for volatility,” Vermillion said.
Curtis, meanwhile, sees Bitcoin as a store of value and hedge to protect against the debasement of fiat currencies. For his purposes to date, he has used ETFs to gain exposure.
“It is simple and achieves our objective. However, for clients with large, concentrated Bitcoin or other cryptocurrency exposures, we are also exploring direct custody as a service offering,” Curtis.
Finally, Elevation’s Reynolds generally categorizes crypto investors into two camps. The first camp is those who see crypto as a hedge against the current financial system and tend to favor cold storage or direct ownership. These investors typically have a distrust of government and have a strong desire for an independent currency outside of the financial system.
The second camp of investors really just wants exposure to the performance of crypto as an asset.
“I fall into the second camp and I find it much more convenient to invest in crypto through funds and ETFs,” Reynolds said.
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