“Crypto hedge funds remain popular investment vehicles for investors seeking exposure to the crypto-asset market.”
More than half of the funds have operations in the U.S., but those funds did not respond differently from others to U.S. regulations, with 42% saying those regulations are not expected to impact them. The funds listed segregation of assets , financial audits and an independent statement of reserve assets as requirements they would like to see for trading venues.
Tokenization seems not to have made a big splash in the sector. Only 15% of funds are considering investing in tokenized securities, and only 4% tokenize units in their own funds.The portion of traditional hedge funds that invest in crypto fell from 37% in 2022 to 29% in 2023. Of the funds still investing in crypto, 62% hold less than 5% of their assets under management in crypto and only 8% hold more than 20% in crypto.
Among the funds not investing in crypto, “client reaction or reputational risk” has overtaken “regulatory uncertainty” as the main reason, but 40% said that the removal of regulatory barriers would not move them to begin investing in crypto. PwC partnered with alternative asset manager CoinShares to survey 131 crypto-native funds. The Alternative Investment Management Association obtained data from 59 traditional hedge funds for that section.