Global crypto hedge funds lost 50% in 2018 amid bear market: PwC report

By Staff Writer

Global cryptocurrency hedge funds median performance yielded a negative 46% in 2018 as they succumbed to bear market conditions, an annual global crypto hedge fund report jointly published by PwC and Elwood Asset Management has found.

Crypto hedge funds, however, have been able to increase their fund size three-fold in 2018 despite nearly 72% fall in the price of Bitcoin. Median asset under management (AUM) at crypto hedge funds increased from $1.2mn as of January 2018 to $4.3mn as of the first quarter of 2019, according to the report (see here).

Interestingly, some did better than others in performance. While quantitative funds lost 8%, long-only “fundamental” funds and discretionary funds yielded negative returns of 53% and 63% respectively.

The report is based on data on 100 of the largest global crypto hedge funds by assets under management from the first quarter of 2019.

Average AUM at a crypto hedge fund as of the first quarter of 2019 is $21.9mn while over 60% of crypto hedge funds have less than $10mn in AuM with fewer than 10% managing over $50mn, the report found.

The average fees for crypto hedge funds are 1.72% management fee and 23.5% performance fee.

Average crypto hedge fund investment professional has 3 to 4 years’ investment management experience, with the average fund team consisting of 7 to 8 people.

However, only 25% of crypto hedge funds’ boards have independent directors and 52% use an independent custodian. The report also found that the majority of crypto hedge funds (64%) are based in the United States.

PwC’s global crypto lead Henri Arsanian believes that the “crypto hedge fund industry today is probably where the traditional hedge fund industry was in the early 1990s.”

“We expect the industry to go through a rapid period of institutionalisation and implementation of sound practices over the coming years,” Arsanian said.

Bin Ren, chief executive of Elwood, a UK-based investment firm specializing in blockchain assets, believes the research shows that “there is increasing evidence of institutionalisation” which should go a long way in helping the crypto asset to be regarded as an established asset class.

He called for higher transparency and more education and awareness about cryptocurrencies and digital assets.

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