Growing Interest in Hedge Fund Crypto Assets

Nearly one in three hedge funds – or 29% – that have not yet invested in digital assets say they want or are in the advanced stages of planning to invest in the space, a new study from the consultancy reveals PwC

The survey was conducted in the first quarter of 2022 on a sample of 77 hedge fund managers specializing in cryptocurrencies, in collaboration with Elwood Asset Management (now part of) CoinShares

Source: iStock/RyanJLane

According to research findings published in PwC’s Global Crypto Hedge Fund Report for 2022, the percentage of hedge funds looking to the crypto market for future investments has increased from 26% last year to 29% this year.

Source: PwC

Separately, the survey also found that 41% of hedge funds that haven’t invested yet are unlikely to do so in the next three years, while 31% said they were “curious” about the topic. , but rather wait until the market is more mature.

Of the funds that did not invest, the main reason for the decision to stay out, according to the PwC document, was “regulatory and tax uncertainty”. This is followed by “customer response” or “reputation risk”, which is their second concern.

One in three funds has already invested

The report indicates that one in three hedge funds has already invested in digital assets. This figure is a marked increase from last year, when only one in five funds indicated they had made investments in the sector.

Of the funds that have previously invested, an average of 4% of assets under management are now invested in cryptocurrencies, up 3% from a year ago. Still, the allocation for funds with more than $5 billion in total assets under management was lower, at less than 1%, according to the survey.

When asked about the digital assets they invest in, two-thirds of respondents mentioned Bitcoin (BTC) or Ethereum (ETH), while only 29% mentioned other crypto assets listed on a centralized exchange.

19% of hedge funds active in the crypto market said they have exposure to non-fungible tokens (NFTs).

Source: PwC

67% of funds want to increase their exposure

Two-thirds of funds that have previously invested in the crypto market said they plan to increase their exposure to the emerging asset class this year. This figure is a drop from last year’s survey, when 86% of funds said the same.

Of funds looking to allocate more capital to digital assets, 57% currently have less than 1% of their assets under management allocated to these assets. A third of respondents seeking more exposure have allocated between 2% and 5% of their assets under management to crypto, according to the survey.

Fund managers remain optimistic

Finally, the survey also found that as of April 2022, when the answers were given, most hedge fund managers were still optimistic about Bitcoin’s price.

All respondents predicted that the price of Bitcoin would end the year above $40,000. The median price forecast for this year came in at $75,000, with about 5% of respondents saying bitcoin would finish the year above $100,000.

Source: PwC

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