A PwC survey of 100 hedge funds found that almost half are betting on digital assets, and the report also dissects hedge funds’ strategies and where they are most cautious.
About 47% of traditional hedge funds have exposure to digital assets, the study found, up from about 29% last year and about 37% in 2022.
A survey conducted by PwC and the Alternative Investment Management Association of around 100 hedge funds around the world found that hedge funds are rapidly entering the market due to clearer regulations and the launch of spot cryptocurrency ETFs in both the US and Asia. It turned out that
Of those who have already invested, more than two-thirds, or 67%, plan to continue holding the same amount in cryptocurrencies, while the remainder say they intend to increase their holdings by the end of the year.
“Regulatory clarity continues to advance,” Steve Kurtz, Galaxy’s global head of wealth management, said in the report. “There will be a continued period of institutional adoption.”
The 100 funds surveyed (42% traditional funds and 58% focused on digital assets) had approximately $125 billion in assets under management.
Their responses were collected during the second quarter, when crypto prices were at record or near-record levels.
strategy
The most popular digital asset strategies among traditional hedge funds include market neutral and discretionary long-only, each adopted by a third or 33% of respondents.
Investors prefer market-neutral strategies that “allow them to manage risk while pursuing returns in volatile digital asset markets,” the report said.
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Discretionary long-only strategies “do not have the volatility-suppressing properties of market-neutral portfolios, but can take advantage of the upside potential of innovative blockchain projects and tokens.”
Approximately 17% of respondents preferred quantitative long/short strategies and quantitative long-only strategies.
Quantitative long/short strategies “tend to utilize algorithmic models and data analysis to take advantage of market inefficiencies and trend recognition,” the report states.
quick finish
Macro analyst Noel Acheson says not to get too excited about hedge funds getting involved in cryptocurrencies.
They are not long-term holders or long-term only investors.
“Keep in mind that they are just as likely to go short as they are to go long, and can exit quickly,” Noel Acheson writes in the newsletter “Cryptocurrency is Macro Now.” I’m writing.
However, she added: “There are fewer and fewer reasons for hedge funds to treat cryptocurrencies as pure risk plays. It means you can trade relative risks within a basket of currencies more efficiently.”
“The expansion of liquidity and market size will allow larger players to enter, further promoting liquidity and market size,” he said, adding that it will also encourage further development of infrastructure.
risk
More than three-quarters, or 76%, of traditional hedge funds that do not invest in digital assets say they are unlikely to enter this space within the next three years. This is up from 54% in 2023.
The report says the biggest barrier to entry is the exclusion of digital assets from investment obligations.
As a global framework emerges, including Europe’s MiCA rules, regulatory uncertainty, a key concern, is diminishing.
Trista Kelley is the editor-in-chief of DL News. Any tips? Email trista@dlnews.com.
