The number of hedge funds investing in digital assets has doubled in the course of a year, according to research from PwC.
The fourth Annual Global Crypto Hedge Fund Report, produced by PwC and Elwood Asset Management, shows that there are now more than 300 traditional hedge funds with holdings in crypto or digital assets, which accounts for more than a third of the hedge funds sector.
This acceleration of interest has occurred despite the depression in the crypto sector and the tumbling valuations of some cryptocurrencies.
The assets under management (AuM) of crypto hedge funds have grown by more than 8% over the last 12 months to reach $4.1 billion.
Despite the growth, the majority of hedge funds have only modest holdings in crypto – 57% have less than 1% of their AuM invested in digital assets. However, two-thirds of funds (67%) currently investing in digital assets plan to increase their allocation before the end of the year.
The most growth though has been among the specialist crypto hedge funds which have seen their median AuM almost treble over the last 12 months, from $8.5million to $24.5 million, while average AuM has more than doubled from $23.4million to 58.6 million.
But as the report states, there is increasing involvement from traditional hedge funds. “In addition to the numerous hedge funds investing in crypto, many larger ‘traditional’ asset managers have been exploring the crypto space, working on pilots, and are now starting to launch product,” said Olwyn Alexander, global asset and wealth management leader, PwC Ireland.
“This will help to accelerate the institutionalisation of the crypto markets and, as they mature, regulation and infrastructure will continue to improve. Given recent market developments, we are hearing greater demand for transparency and trust from investors,” said Alexander.
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