PwC and Elwood Asset Management Services used data from the largest global crypto hedge funds to compile the report.

Assets under management (AUM) at crypto hedge funds doubled from $1 billion in 2018 to $2 billion in 2019, while average assets under management expanded from $21.9 million to $44 million, said the report. Median AuM increased from US$4.3 million to US$8.2 million. (CIO)

Returns at crypto hedge funds

The report put the median return from these funds at 30% last year. This compared very favorably with the loss of 46% incurred in 2018. Median returns by strategy type were:

• discretionary long only – 40%
• discretionary long-short – 33%
• quantitative – 30%
• multi-strategy – 15%

Strategy adoption

The breakup of the fund universe by strategy was:

• quantitative – 48%
• discretionary long only – 19%
• discretionary long/short – 17%
• multi-strategy – 17%

The study found that about 56% of the crypto funds traded derivatives, while 48% were active short sellers.

Analysis by type of crypto traded

• bitcoin – 97%
• Ethereum – 67%
• XRP – 38%
• LiteCoin – 38%
• bitcoin cash – 31%
• EOS – 25%

Analysis of funds by type of investor

• family offices – 48%
• high net worth individuals – 42%

The average investment size was $3.1 million, while the median investment size was $ 300,000.

How funds charged investors

• median management fees – 2% (unchanged)
• median performance fees – 20% (unchanged)
• average management fee – 2.3% (up from 1.7%)
• average performance fee – 21.1% (down from 23.5%)

The report expressed concerns that fund running costs had “increased materially” in recent years. Heightened regulatory compliance had also pushed up costs.

“Despite the slight increase in management fees, crypto funds will still find it challenging to break even, unless they can attract enough investors, keeping in mind that the median crypto hedge fund in 2019 had US$8.2 million in AuM,” the report observed.

“The reality is that, at such low median AuMs, we expect a large number of existing crypto funds to shut down unless they can generate exceptionally high returns,” the report added.

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