PwC and Elwood Asset Management (Elwood) have published a report examining the global crypto hedge fund landscape. The report is based on data from research in the first quarter of 2019 on 100 of the largest global crypto hedge funds by AuM.
The report highlights that the average crypto hedge fund AuM as of Q1 2019 is USD21.9 million. Over 60 per cent of crypto hedge funds have less than USD10 million in AuM with fewer than 10 per cent managing over USD50 million.
The data highlights that crypto hedge funds have been able to increase their AuM three times in 2018 despite market conditions, with the median crypto hedge fund AuM having grown from USD1.2 million as of January 2018 (the median launch date for crypto hedge funds) to USD4.3 million at the end of Q1 2019.
By evaluating performance in this sector, the report finds that while 2018 saw a 72 per cent fall in the price of Bitcoin, the median crypto hedge fund returned -46 per cent over the same period, indicating that these managers were successfully able to outperform their benchmark. However, performance differed based on the type of strategy pursued. The median quantitative fund returned 8 per cent in 2018. The median fundamental and discretionary funds performed less well, with returns in 2018 of -53 per cent and -63 per cent respectively.
The report found that the average fees for crypto hedge funds are 1.72 per cent management fee and 23.5 per cent performance fee.
The report also captures data on the level of experience and governance among crypto hedge funds. It was found that the average crypto hedge fund investment professional has three to four years’ investment management experience, with the average fund team consisting of 7 to 8 people. However, only 25 per cent of crypto hedge funds’ boards have independent directors and 52 per cent use an independent custodian. The report also found that the majority of crypto hedge funds (64 per cent) are based in the United States.
Henri Arslanian, PwC Global Crypto Leader, says: “The crypto hedge fund industry today is probably where the traditional hedge fund industry was in the early 1990s. We expect the industry to go through a rapid period of institutionalisation and implementation of sound practices over the coming years.”
Bin Ren, CEO of Elwood, says: “The crypto hedge fund space is just one part of a much broader ecosystem of digital assets, around which there is increasing evidence of institutionalisation. This broader interest from investors and regulators is undoubtedly a positive step towards digital assets being recognised as an asset class with true viability and longevity. However, in order for that progress to continue it needs to be accompanied by greater transparency and education, and this report is a step towards achieving that.”
