1. Approximately one in three of “traditional” hedge funds surveyed are currently investing in digital assets, compared to one in five when we surveyed last year. The average allocation to digital assets by these funds measures 4% (a slight increase from 3% last year).
2. By strategy, hedge funds with the most digital assets exposure include multi-strategy (32%), macro (21%), equity (18%), and systematic (12%).
3. Of those hedge funds who are invested in digital assets, 57% have a toe-hold position with less than 1% of their total hedge fund AuM invested.
4. Two thirds of those hedge funds (67%) who are currently investing in digital assets intend to deploy more capital into the asset class by the end of 2022.
5. 29% of hedge fund managers who are not yet investing in digital assets confirmed that they are in late-stage planning to invest or looking to invest.
6. Regulatory and tax uncertainty continues to be the greatest barrier to investing (cited by 83% of respondents). Of greatest concern is the globally fragmented regulatory approach/environment, followed by unclear guidance with heightened threat of rulemaking through enforcement.
7. The lack of infrastructure/service provider availability also remains a challenge with audit and accounting now seen as the market infrastructure area being the most in need of essential improvements (94%), surpassing custody and safekeeping as the major service provider challenge to greater adoption.
8. Around a third of respondents not currently investing say that if the main barriers were to be removed, they would actively accelerate their involvement/investment in digital assets (27%), an increase from 18% last year. While 45% of respondents stated that the removal of barriers would still probably not impact their current approach.
About the research
The Alternative Investment Management Association (AIMA) is delighted to partner once again on this industry-wide initiative to offer the very latest insights into the growing interest in the digital assets market by “traditional” hedge funds (funds that do not invest exclusively in digital assets).
The AIMA chapter offers insights into the current approach taken by these funds when assessing whether to invest in digital assets and explores the main barriers with respect to investments. Overall, the chapter offers insights into whether “traditional” hedge funds have investments in digital assets, their views on the asset class, and what they believe would be the catalysts for them to invest initially and more significantly in digital assets.
The research contained in the chapter comes from a survey that was conducted in Q1 2022 by AIMA, with 89 hedge funds that accounted for an estimated US$436 billion in Assets Under Management (AuM). 57% of the responses were from hedge funds managing assets in excess of US$1 billion.
This survey was put together with the assistance of the AIMA Digital Assets Working Group (AIMA DAWG) – a cross-section of around 300 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]).