‘Long Only’ Stategy Most Profitable for Crypto Hedge Funds: PwC Survey

Cryptocurrency-focused hedge funds have increased their assets under management by nearly 100% in 2020 compared to the previous year, estimated a recent report compiled by PwC. On average, the funds returned more than 120% in 2020, while the percentage was just 30% in 2019.

Growing Involvement of Crypto Hedge Funds

In their third annual Global Crypto Hedge Fund Report, PwC and the Alternative Investment Management Association (AIMA) reviewed the performance of actively managed crypto hedge funds investing or trading in “liquid, public cryptocurrencies.”

Both parties located up to 200 such funds, with the majority being launched in the past three years (81%). Nevertheless, 2020 turned out to be the most successful year, mainly due to the significant price appreciations in the market and the entrance of new large investors.

As a result, the crypto-focused hedge funds raised their AUM to $3.8 billion from $2 billion in 2019. The percentage of funds with an AUM of over $20 million increased from 35% to 46%.

“The average AUM for this year’s surveyed funds increased from $12.8 million to $42.8 million, while the median AUM increased from $3.8 million to $15 million,” – reads the paper.

Given the aforementioned substantial price increases, the median crypto hedge fund returned 128% in 2020. For comparison, the median return was at 30% in 2019.

Nevertheless, funds following the discretionary long-only strategy enjoyed the most significant results of almost 300%.

The crypto-oriented organizations reported that most of their customers are high-net-worth individuals (54%), followed by family offices (30%).

Non-Crypto Funds Getting More Involved

PwC and AIMA also surveyed traditional hedge funds about their views and potential participation in the digital asset space. Somewhat expectedly, such organizations increased their exposition in 2020 following the market boom.

The survey’s results show that 21% of traditional hedge funds have invested in various cryptocurrencies, with bitcoin taking the largest position. Although their average allocation represents just 3% of their entire portfolios now, over 85% of them intend to deploy more capital by the end of 2021.

Those who are still fearful of getting involved cited regulatory uncertainty as the greatest barrier. Others were uncertain about their clients’ reactions and “digital assets being outside the scope of current investment mandates.”

Over 60% also admitted that they didn’t have enough knowledge on the matter but might reconsider their position should they receive a better education.