Crypto-Based Hedge Funds Win Big in 2020 Cryptocurrency Bull Run

According to a new report by PwC, cryptocurrency-focused hedge funds increased their investment in 2020 by close to 100% compared to the year before. On average, these companies returned about 120% last year compared to an average of 30% in 2019.

Meanwhile, PwC and the Alternative Investment Management Association (AIMA) recently released their third annual Global Crypto Hedge Fund Report. The report analyzed the performance of crypto hedge funds dealing in “liquid and public cryptocurrencies.”

The duo identified about 200 such companies, with 81% of these companies launching within the last three years. 2020 was an exceptionally successful year for the crypto industry, primarily because of the significant inflow of institutional investors and market value increase.

That said, crypto-based hedge funds have grown their asset base from $2 billion in 2019 to $3.8 billion in 2020. Also, the percentage of hedge funds with an AUM over $20 grew from 35% to 46%.

The report noted that:

“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.”

Notably, reports show that funds that obey the discretionary long-only strategy made the highest returns with almost 300%.

Meanwhile, crypto-based funds reported that most of their customers are high-net-worth individuals, who account for 54% of all slots, followed by family offices with 30%.

Traditional Hedge Funds are Rapidly Getting Involved

PwC and AIMA also ran a survey on traditional hedge funds on their views and potential investment in the cryptocurrency industry. As expected, these companies increased their exposure to the crypto industry in the 2020 boom.

The survey revealed that 21% of traditional funds have made investments in several cryptocurrencies, especially in Bitcoin. Additionally, over 85% of these funds asserted that they would deploy more capital into the industry by the end of the year.

Meanwhile, those that are wary about investing in the crypto space cited regulatory uncertainty to be the most pressing barrier.

 

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