May 24, 2021
Around a fifth of traditional hedge funds (non-crypto) are investing in digital assets (21%). The average percentage of their total hedge fund AuM invested in digital assets is 3%. More than 85% of those hedge funds intend to deploy more capital into the asset class by the end of 2021, according to a report published by consultancy PwC and Elwood Asset Management.
Total assets under management (AuM) of crypto hedge funds globally increased to nearly US$3.8 billion in 2020 from US$2 billion the previous year.
The average AuM for this year’s surveyed funds increased from US$12.8 million to US$42.8 million, while the median AuM increased from US$3.8 million to US$15.0 million.
The median crypto hedge fund returned +128% in 2020 (vs +30% in 2019). The median best performance strategy in 2020 was discretionary long-only (+294%) followed by discretionary long-short (+129%), multi-strategy (+114%) and quant (+72%), according to the third annual edition of the report.
The vast majority of investors in crypto hedge funds are either high-net worth individuals (54%) or family offices (30%). The median ticket size is US$0.4 million, while the average ticket size is US$1.1 million.
The most common crypto hedge fund strategy is quantitative (37% of funds), followed by discretionary long/short (28%), discretionary long-only (20%), and multi-strategy (11%). Most crypto hedge funds trade Bitcoin ‘BTC’ (92%) followed by Ethereum ‘ETH’ (67%), Litecoin ‘LTC’ (34%), Chainlink ‘LINK’ (30%), Polkadot ‘DOT’ (28%) and Aave ‘AAVE’ (27%).
About half of crypto hedge funds trade derivatives (56%), but short-selling has drastically reduced, from 48% to 28% in 2020.
In terms of the main impediments to investing, regulatory uncertainty is by far the greatest barrier (82%). Even those who do invest in digital assets cite it as a major challenge (50%).