Hedge Funds More Engaged with Digital Assets – AIMA

Hedge funds engagement with the digital assets world continues to grow, thanks largely to greater regulatory clarity according to the latest AIMA Global Crypto Hedge Fund Report, which argues that the still-nascent asset class is poised to move from the fringes of finance to the mainstream of hedge fund portfolios.

A notable aspect of the report, the seventh such edition which surveyed 122 respondents  with an estimated $982 billion AUM, is how “traditional” hedge funds (identified by AIMA as funds with less than half their AUM in digital assets) are embracing the market, it finds that 55% (up from 47% in 2024), now have some form of exposure, often through spot and derivatives trading, exchange‑traded products and increasingly through equities and tokenised assets.

The actual investment numbers remain fairly low, however, the average is 7% of AUM at traditional funds, 52% of this group have less that 2% AUM invested in digital assets, 29% between 2% and 10%, and 19% more than 10%. There was a leap in the percentage looking to increase exposure, however, with 71% saying they were looking at this in 2025, compared to just 33% in 2024.

Meanwhile, the report finds that crypto-native hedge funds continue to grow in scale and sophistication, supported by strong price movement in crypto asset markets that earlier this year surpassed $4 trillion in total market value. The average AUM for these funds rose to $132 million in 2025, from $79 million in 2024, only 9% manage above $1 billion. That said, investor participation is gradually widening beyond family offices and high‑net‑worth individuals, the report further observes, to include an increasing number of fund of funds, foundations, endowments, pension plans and sovereign wealth funds.

It is not all plain sailing, however, for the report notes that just under half of those with no exposure to digital assets said they have no plans to enter the space. In part this is due to mandate barriers, requiring, AIMA says, increased investor education and internal fund flexibility. If these barriers were removed, AIMA says roughly half of those polled would consider investing.

41% of institutional investors polled said they would increase allocations if gaps in custody, legal and compliance, and fund administration services are filled

“Many investors cite diversification benefits, asymmetric return potential and long‑term outperformance as their primary motivations,” the report states. “These investment patterns signal a maturing market with growing acceptance among institutional allocators of digital assets as an investable asset class.”

Market infrastructure remains a critical enabler, notably greater advances in custody services, trading platforms, regulatory frameworks and access to banking rails are viewed as key to unlocking further investment flows. Centralised exchanges remain the primary venues for trading, but 41% of institutional investors polled said they would increase allocations if gaps in custody, legal and compliance, and fund administration services are filled.

The report also observes how, in spite of the capital efficiency and leverage offered by the most popular instruments – crypto derivatives, used by 67% of respondents (from 58%) – these instruments also raise systemic risks. “The October 2025 flash crash, which triggered over $19 billion in liquidations, exposed vulnerabilities related to excessive leverage and a lack of institutional-grade infrastructure,” the report states. “While many centralised exchanges were significantly affected, decentralised exchanges (DEXs) demonstrated greater resilience, highlighting some of the structural advantages inherent in decentralised trading technologies.”

Tokenisation is also rapidly gaining momentum as a structural trend in financial markets, the report notes, with 52% of respondents expressing some interest, however the report also notes that 72% cite legal uncertainty and limited investor demand as hurdles to be overcome. That said, AIMA says that investment managers are increasingly assessing the asset class’ potential to expand investor reach and streamline operations, even as the ecosystem continues to mature across areas like regulation, liquidity and integration.

Although not the central focus of the report, AIMA says the maturation of stablecoins over the past year has also been a significant driver of institutional adoption and a tailwind for the growth of tokenised assets. Equally, 43% of traditional hedge funds with some exposure to crypto are planning to increase or begin engagement with decentralised finance (DeFi) over the next three years. Nearly one-third of these managers also believe DeFi will disrupt their operations within the same timeframe,’ the report notes, adding this may reflect regulators’ growing recognition of hybrid on-chain models within evolving market structure discussions.

As clearer rules and guidance emerge under the new US administration and market infrastructure continues to mature, confidence, capital and conviction in digital assets as an investable asset class are clearly on the rise

The report concludes by observing that it reflects an industry at an inflection point, “Once a niche allocation for a few risk-tolerant hedge funds, digital assets are rapidly becoming integral to the investment strategies of most hedge fund managers as well as a growing number of institutional investors,” it states.

This is also reflected upon by James Delaney, managing director, asset management regulation at AIMA, who says, “In recent years, our research has identified regulatory uncertainty as a major barrier to greater institutional adoption. This year’s survey marks a turning point, with digital assets now moving from the margins toward the mainstream of hedge fund and institutional investing. As clearer rules and guidance emerge under the new US administration and market infrastructure continues to mature, confidence, capital and conviction in digital assets as an investable asset class are clearly on the rise.”

Looking ahead, the report concludes, “The convergence of regulatory clarity, infrastructure maturity and continuing technological advancements positions digital assets to play an even more significant role in hedge fund and institutional portfolios. The question is no longer if institutions will adopt digital assets but how quickly and at what scale will they reshape portfolio construction.”

The full report can be accessed here.