AIMA: crypto hedge fund AuM doubles, average returns at 128% in 2020

  • Total AuM of crypto hedge funds almost doubled in 2020 to reach $3.8 billion (vs $2 billion in 2019)
  • Crypto hedge funds on average returned 128% in 2020 (vs +30% in 2019)
  • 47% of traditional hedge fund managers surveyed representing $180 billion of AuM are already invested or looking at investing in crypto

The Alternative Investment Management Association, along with PwC and Elwood Asset Management, published their third annual report examining the global crypto hedge fund landscape. The report is based on data from research in the first quarter of 2021 on crypto hedge funds.

Jack Inglis, CEO of AIMA, said in a statement: “From the findings in this report it’s evident that hedge fund allocations to digital assets continue to gain traction. Diversification and exposure to a new value creation ecosystem are cited as key drivers for investing in digital assets…Further education, regulatory clarity and the evolution of service providers and related market infrastructure could lead to the acceleration of increased investment and further institutionalisation of the industry.”

Key Findings:

Market and performance overview:

  • Total AuM of crypto hedge funds globally increased to nearly $3.8 billion in 2020 from $2 billion the previous year
  • The percentage of crypto hedge funds with AuM over $20 million increased in 2020 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 $15.0 million.
  • The median crypto hedge fund returned +128% in 2020 (vs +30% in 2019)
  • Most trade bitcoin (92%) followed by ETH (67%), LTC (34%), LINK (30%), DOT (28%) and AAVE (27%)
  • The median best performance strategy in 2020 was discretionary long only (+294%) followed by discretionary long-short (+129%), multi-strat (+114%) and quant (+72%).

Location, management and investors:

  • The vast majority of investors in crypto hedge funds are either high-net worth individuals (54%) or family offices (30%)
  • Funds tend to be domiciled in the same jurisdictions as traditional hedge funds, with the top three being the Cayman Islands (34%), the United States (33%) and Gibraltar (9%)
    The most common location for managers is the United States (43%), followed by the United Kingdom (19%) and Hong Kong (11%).

Traditional hedge funds

Investments in Crypto:

  • Around a fifth of traditional hedge funds surveyed representing $180 billion in AuM are currently investing in digital assets (21%); the average percentage of their total hedge fund AUM invested in digital assets is 3%
  • 86% currently investing in digital assets intend to deploy more capital into the asset class by the end of 2021
  • Around a quarter who are not yet investing in digital assets confirmed that they are in late-stage planning to invest this year or looking to invest (26%).

Barriers to Investments:

  • Regulatory uncertainty is by far the greatest barrier to investing (82%). Even those who do invest in digital assets cite it as a major challenge (50%). The lack of infrastructure or service provider availability also remains a barrier with custody being the area most in need for improvement.
  • In terms of other reasons to not invest, client reaction/reputational risk is high (77%) as well as digital assets being outside the scope of current investment mandates (68%). Almost two thirds of traditional hedge funds said that they don’t have enough knowledge of digital assets (64%), suggesting the need for more education
  • Around two thirds said that if the main barriers were to be removed they would either actively accelerate investment in digital assets or potentially change their approach and become more involved (64%).

Read the full report

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