Press Release: 5th Annual Global Crypto Hedge Fund Report (2023)
Published: 12 July 2023
Traditional hedge funds are divided while crypto natives remain confident despite last year’s market turbulence: Global Crypto Hedge Fund Report
- The number of traditional hedge funds investing in crypto-assets fell to 29% – down from 37% last year – however no traditional hedge fund plans to decrease exposure in 2023
- 23% of traditional hedge funds are reassessing their crypto strategy due to the regulatory environment in the US; 12% of crypto hedge funds are considering relocating from the US to crypto-friendly jurisdictions
- 93% of crypto hedge funds expect the market capitalisation of crypto-assets to be higher at the end of 2023 than 2022
- 31% of traditional hedge funds view tokenisation as the biggest opportunity in 2023; 25% of traditional hedge funds – including those not currently invested in crypto – say they are exploring tokenisation
Traditional hedge funds who have exposure to crypto-assets have also expressed apprehension about the evolving regulatory environment – in the US – with 23% noting it will have a material impact on them or lead them to reconsider the viability of their crypto asset exposures. Just over half (54% of traditional hedge funds not currently investing) confirmed they would change their approach and become more interested in the asset class if perceived industry barriers and uncertainties were resolved – an increase from 29% last year. In contrast, crypto hedge funds seem relatively less troubled by these regulatory developments, with only one-third expecting greater legal and compliance costs and 12% remarking that the current regulatory environment in the US may lead to them moving to more crypto-friendly jurisdictions.
Tokenisation as a way forward
Traditional hedge funds have demonstrated a greater degree of curiosity in tokenised assets and securities – with one-quarter exploring tokenisation – compared to crypto hedge funds, of which only 15% of respondents reported exploring investments in tokenised securities. Tokenisation of funds holds the promise of increased efficiency and reducing friction by enabling faster settlement times and minimising operating costs, with around one-in-three (31%) traditional hedge funds surveyed noting tokenisation as the biggest growth opportunity in the crypto-asset space in the coming year.
Jack Inglis, CEO of AIMA, said:
“The digital assets space has had to reckon with short-comings in its fundamental operations, including risk management, as well as allegations of corporate malfeasance. Some observable resilience in investor interest in the space, especially in newer areas like tokenisation, will provide a foundation for industry participants to rebuild confidence among institutional investors and traditional hedge funds seeking to allocate to this asset class.”
Alexandre Schmidt, Index Fund Manager at CoinShares, said:
“Crypto hedge funds have shown remarkable resilience in 2022 amid a challenging environment. The majority of the surveyed funds generated positive alpha, underscoring the essential role that these firms have in the digital asset ecosystem. As we navigate through 2023 and beyond, regulators are introducing near-term hurdles which shall pave a clearer path to investing in digital assets in the longer run, fostering higher adoption from investors across the whole spectrum, from small retail to large institutions."
Notes to Editors:
About the report: The 2023 Global Crypto Hedge Fund Report examines the current state and evolution of the crypto hedge fund market over the past year. The data contained in this report comes from two surveys – the first from research conducted in Q1 2023 across a sample of 131 crypto native hedge funds. The first survey specifically focuses on crypto native hedge funds (i.e., hedge funds created with the intention of dealing primarily in crypto-assets) and excludes data from crypto index funds and crypto venture capital funds. We have worked with CoinShares to obtain survey responses from crypto native hedge funds. For the second survey, we worked with the Alternative Investment Management Association (AIMA) to obtain data from 59 ‘traditional’ hedge funds (i.e., hedge funds with some or no exposure to crypto-assets). Specifically, the survey questions were designed to understand the impact that notable market disruptions from last year had on fund managers and the report highlights key trends observed from the survey results.
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About AIMA: The Alternative Investment Management Association (AIMA) is the global representative of the alternative investment industry, with around 2,100 corporate members in over 60 countries. AIMA’s fund manager members collectively manage more than US$2.5 trillion in hedge fund and private credit assets. AIMA draws upon the expertise and diversity of its membership to provide leadership in industry initiatives such as advocacy, policy and regulatory engagement, educational programmes and sound practice guides. AIMA works to raise media and public awareness of the value of the industry. AIMA set up the Alternative Credit Council (ACC) to help firms focused in the private credit and direct lending space. The ACC currently represents over 250 members that manage US$800 billion of private credit assets globally. AIMA is committed to developing skills and education standards and is a co-founder of the Chartered Alternative Investment Analyst designation (CAIA) – the first and only specialised educational standard for alternative investment specialists. AIMA is governed by its Council (Board of Directors). For further information, please see www.aima.org
About CoinShares: CoinShares is Europe’s largest digital asset investment firm, managing billions of assets on behalf of a global client base. Our mission is to expand access to the digital asset ecosystem by pioneering new financial products and services that provide investors with trust and transparency when accessing this new asset class. CoinShares expanded its footprint into the equities market with the purchase of Elwood Asset Management on 6 July 2021, enabling Elwood to focus on building digital asset infrastructure for financial institutions, creating the bridge between traditional and crypto markets.