1. The number of traditional hedge funds investing in crypto-assets is lower than last year – 29% compared to 37%. However, average AUM invested in the asset class has increased from 4% to 7%.
2. Just over half of hedge funds that invest in crypto-assets intend to maintain the same levels of capital deployed this year. The remainder stated that they intend to deploy more capital into the asset class by the end of 2023. Notably, no hedge funds said they were reducing their exposure this year.
3. Around a quarter of hedge funds that are currently investing in crypto-assets say that increased regulatory uncertainty in the US will have a major impact or may lead them to reconsider the viability of their crypto-assets strategy. Around one-third stated that the regulatory approach in the US will increase legal and compliance costs. A third of respondents stated that it is leading to increased difficulty in accessing banking services.
4. A key trend coming out of this year’s findings is that a quarter of hedge funds, including those that are not currently investing in crypto-assets, confirmed that they are now exploring tokenisation in the asset management sector. Around a third of hedge funds currently investing in crypto-assets believe that tokenisation of real assets will be the biggest growth opportunity in this space over the coming year.
5. Around a third of the respondents that are not investing in crypto-assets confirmed that they are curious about the asset class, but waiting for further maturity. Just over two-thirds of these are billion dollar hedge funds.
6. ‘Client reaction or reputational risk’ has this year replaced ‘regulatory uncertainty’ as the greatest barrier to investing in this asset class. Around half of hedge funds not investing stated their outlook was ‘negatively’ or ‘strongly negatively’ impacted by last year’s events.
7. Just over half of respondents confirmed that they would change their approach and become more interested in the asset class if perceived barriers – such as lack of regulatory clarity – were removed. 40% stated that the removal of barriers would not prompt them to invest in this asset class.
About the research
AIMA has partnered with PwC for a third year to offer insights into the evolving crypto-asset investment landscape for ‘traditional’ hedge funds (i.e. funds that do not invest, or do not invest exclusively, in crypto-assets). AIMA’s findings provide an insight into the current sentiment around crypto-asset investment by traditional hedge funds. They offer an industry perspective on some of the barriers to investing in crypto-assets and on the institutionalisation of this nascent asset class.
All input to the AIMA survey and commentary on its results came via AIMA’s Digital Assets Working Group (AIMA DAWG).
The research contained in the AIMA Chapter comes from a survey that was conducted in Q1 2023 by AIMA, with 59 hedge funds that accounted for an estimated US$280 billion in AUM.
The AIMA survey was put together with the assistance of the AIMA Digital Assets Working Group (AIMA DAWG) – a cross-section of senior industry experts including institutional investors, custodians, exchanges and other service providers. It is tasked with driving AIMA’s regulatory engagement, thought-leadership initiatives and operational guidance in the area of digital assets.
We would like to thank everyone that participated in the survey and shared their insights. If you would like to learn more about AIMA DAWG, please contact James Delaney ([email protected]) or Michelle Noyes ([email protected]).
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The Long-Short Podcast
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Each episode will examine topical areas of interest from across the alternative investment universe with news, views and analysis delivered by AIMA’s global team, as well as a host of industry experts.
The 5th Annual Global Crypto Hedge Fund Report (2023), a new research piece from AIMA, PwC and CoinShares, provides some much-needed insight and data to the pressing questions around the current sentiment of traditional hedge funds and crypto fund managers towards the digital asset investment space today.
To delve into the findings, Drew Nicol is joined by a couple of the report’s authors, Peter Brewin, a Partner at PwC Hong Kong, and James Delaney, a Director in AIMA’s Government Affairs team and central figure in AIMA’s Digital Assets Working Group (AIMA DAWG). The in-depth conversation covers emerging trends, investment strategies, evolving market structure, regulatory efforts and industry reaction to 2022 crypto market events.
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