Although traditional fund managers are hesitant to invest in Bitcoin and Ether, their exposure to digital assets appears to be growing.
Traditional hedge funds are slowly embracing cryptocurrency investments but keeping their exposure limited as the market continues to mature, according to a new study from PricewaterhouseCoopers, or PwC.
In its 4th Annual Cryptocurrency Hedge Fund Report 2022, PwC said that roughly a third of surveyed traditional hedge funds are already investing in digital assets such as Bitcoin (BTC). So-called “multi-strategy” hedge funds were the most likely to invest, followed by macro and equity strategies, respectively.
Cryptocurrency Hedge Fund Report in More Detail
Regarding all the hedge funds currently investing in the crypto space, 57% have allocated less than 1% of their total assets under management. Two-thirds of currently invested companies plan to increase their exposure by the end of 2022.
Respondents cited “regulatory and fiscal uncertainty” as the biggest obstacle to investing. In particular, hedge funds are concerned about a fragmented regulatory environment globally, as well as a lack of clear guidance on how the asset class will be governed.
The Report asserts that in 2021 crypto hedge funds have invested in a wider variety of sectors, which indicates a diversification not evident in the past years. The reason for this, according to their analysts, is the continuing maturation of the industry as a whole.
The Report adds that, “Going forward, as the crypto hedge fund universe expands through new entrants and the continuing mass adoption of Blockchain and cryptocurrencies, we expect the distribution of sectors to increase and for more crypto hedge funds to diversify the sectors they invest in.”
Hedge Funds Watch Crypto Evolution
Large British hedge fund Brevan Howard plans to “significantly scale up” its cryptocurrencies and digital assets
A total of 89 hedge funds were included in the survey, which was conducted during the first quarter of 2022.
Hedge funds and other traditional asset managers have been watching the evolution of the cryptocurrency sector to determine if they should start investing in this space. Although several hedge funds have launched crypto divisions and started investing in the space, most companies remain on the sidelines. Interestingly, a 2021 survey of 100 hedge funds around the world revealed that managers expect to allocate an average of 10.6% to crypto within five years.
Although crypto assets have been in a protracted bear market for much of 2022, institutional investors seem to be buying the most recent price drop. Inflows into Bitcoin investment products such as ETFs and Grayscale’s GBTC product increased by $126 million last week, according to CoinShares. Bitcoin investment funds have quietly added more than $500 million in net inflows this year.
By Audy Castaneda
