PwC recently published its fifth annual global crypto hedge fund report on July 12, which was based on surveys conducted in the first quarter of 2023 among both crypto-native and traditional hedge funds.
Despite the recent crypto winter and ongoing regulatory uncertainties, the report revealed a predominantly positive outlook among the funds.
According to the report, crypto-native hedge funds are actively working towards rebuilding confidence and ensuring their needs are heard.
An overwhelming majority of these funds (93%) expect the market cap to rise over the course of the year. Interestingly, more than half of them (53%) reported no exposure to FTX or the Terra Luna ecosystem.
The report also highlighted that most of the funds performed better than the price of Bitcoin (BTC), which stood at $30,553 in 2022.
This finding emphasizes the popularity of crypto hedge funds as investment vehicles for those seeking exposure to the crypto-asset market.
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While over half of the funds (54%) operate in the United States, they did not respond differently from others to U.S. regulations. In fact, 42% of these funds stated that they do not expect the regulations to impact them significantly.
The report further revealed that the funds expressed a desire for trading venues to implement certain requirements, including asset segregation (75%), financial audits (62%), and an independent statement of reserve assets (60%).
The report also shed light on the limited impact of tokenization within the sector. Only 15% of the surveyed funds are considering investments in tokenized securities, and merely 4% tokenize units within their own funds.
Regarding traditional hedge funds, the proportion investing in crypto decreased from 37% in 2022 to 29% in 2023.
Among those still investing in crypto, 62% allocate less than 5% of their assets under management to the crypto market, while only 8% hold more than 20% in crypto.
The survey found that 46% of these funds plan to increase their crypto investments this year, a decline from 67% in the previous year. Notably, none of the respondents mentioned a decrease in their capital deployed in crypto.
For traditional funds that do not invest in crypto, “client reaction or reputational risk” has become the primary reason, surpassing “regulatory uncertainty.”
Moreover, 40% of these funds stated that the removal of regulatory barriers would not motivate them to begin investing in crypto.
The survey was conducted in collaboration with CoinShares, an alternative asset manager, with 131 crypto-native funds participating. Data from 59 traditional hedge funds was obtained by the Alternative Investment Management Association.
