AIMA Sees Crypto Optimism Among Hedge Funds
Posted by Colin Lambert. Last updated: October 13, 2024
AIMA’s 6th annual Global Crypto Hedge Fund Report finds increased optimism amongst hedge funds regarding digital assets, thanks to increased regulatory clarity and the approval for crypto ETFs earlier this year.
The report examines the current state and evolution of the digital assets hedge fund market over the past year by surveying close to 100 hedge funds in Q2 2024 (both TradFi and crypto focused). The survey was conducted by AIMA and PwC and included funds from over six geographical regions with an estimated aggregate of $124.5 billion in asset under management (AUM).
For this survey, AIMA defines digital asset focused hedge funds as those that have at least 50% of AUM invested in digital assets. It excludes data from crypto index funds and crypto venture capital funds. Specifically, the survey questions were designed to understand the impact that the past year had on fund managers and highlight key themes and trends.
The key findings, according to AIMA, were that digital assets investments were rising with nearly half (47%) of traditional hedge funds surveyed having exposure to digital assets, up from 29% in 2023 and 37% in 2022. This is driven, as noted, by increased regulatory clarity and the launch of spot cryptocurrency ETFs in Asia and the US. Among those already invested, 67% plan to maintain the same level of capital employed while the remaining 33% plan to invest more capital by the end of 2024.
The survey also found that as investment strategies became more sophisticated, there was a shift to derivatives. “There has been a notable shift towards derivative trading in digital assets by traditional hedge funds, with its use rising to 58% in 2024 (up from 38% in 2023), while spot trading dropped to 25% this year after peaking at 69% last year. This signals growing sophistication in hedge fund strategies,” the association states.
Interest in fund tokenisation is also growing, the report finds, with 33% of hedge fund respondents either committed to or exploring tokenisation, compared to around a quarter of traditional hedge funds last year. Among digital asset focused hedge funds, 12% are already investing in tokenised assets, although regulatory challenges remain the biggest hurdle to wider adoption.
The long-standing key to the asset class’ growth, institutional client demand, is also emerging, the survey finds that 43% of traditional hedge funds – whether invested or not in digital assets – are seeing increased interest from institutional clients. Currently, family offices and high-net-worth individuals (HNWIs) remain the largest investor categories in digital asset focused hedge funds, followed by fund of funds.
There is, inevitably perhaps, a note of caution in the report, with the finding that despite the industry’s growth, many traditional hedge fund managers remain hesitant, with 76% of those not currently invested in digital assets unlikely to enter the space within the next three years. This is up from 54% in 2023.
The top barrier, cited by 38% of funds, is the exclusion of digital assets from investment mandates, rising from fourth place last year. While regulatory uncertainty remains a key concern, AIMA says it has eased somewhat due to the adoption of clearer regulatory frameworks like the EU’s MiCA.
