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Hedge funds plan increase their crypto holdings to 7% in five years

Study: Hedge funds plan increase their crypto holdings to 7% in five years

According to a recent poll conducted by global fund administrator Intertrust, hedge fund executives project to increase their crypto holdings over the next five years.

Experts predict crypto allocations to reach 7.2 percent by 2026, according to the survey first reported by Financial Times.

Increase exposure

The survey based on responses from 100 chief financial officers at hedge funds with an average of $7.2 billion in assets under management revealed a massive vote of confidence to increase exposure in digital assets despite the aftermath of recent market dips and proposals to punish new capital restrictions. 

In accordance with the research firm Preqin’s projections for the overall size of the hedge fund sector, Intertrust calculated that it could equate to around $312 billion in crypto assets if reproduced throughout the space. 

Seventeen percent of those polled projected to have more than 10% in cryptocurrency. However, the sector’s current holdings are unknown. Still, some big-name managers have already invested small sums in crypto assets, enticed by high prices and market inefficiencies.

Interest among hedge funds

Hedge fund manager Paul Tudor Jones has invested in Bitcoin, while Brevan Howard has been putting a tiny percentage of its capital in cryptocurrency, and its co-founder, billionaire Alan Howard, is a significant supporter of the space.

David Miller, executive director at Quilter Cheviot Investment Management, stated: Hedge funds “are well aware not only of the risks but also the long-term potential” of cryptos.

The increased interest among hedge funds contrasts sharply with the prevalent skepticism among more conventional asset managers, many of whom are concerned about cryptocurrencies’ high volatility and uncertainties concerning regulation.

Morgan Stanley and Oliver Wyman, in a recent report on asset management, declared:

“For the moment, crypto investments remain limited to clients that have a high-risk tolerance and, even then, investments are typically a low proportion of investable assets.” 

State of the market

The cryptocurrency market has grown enormously since the end of last year when Bitcoin rose from less than $29,000 to over $63,000 in April. Today, Bitcoin is hovering around $40,000 with growing FUD and concerns over its carbon footprint causing the dip.

According to Jean-Baptiste Berthon in an editorial published earlier this year, hedge fund managers have increasingly embraced bitcoin, for example, as a hedge against dropping real yields, quantitative easing, and an alternative to diminishing equity dividend yield.

While levels of interest vary, the study by Intertust finds that all CEOs polled in North America, Europe, and the United Kingdom expect to have at least 1% of their portfolios invested in cryptocurrency.

In addition, North American funds foresee an average exposure of 10.6 percent, while European and United Kingdom funds estimate an average exposure of 6.8 percent.

What this reveals is that despite ongoing regulatory pressure and market volatility, investor demand remains strong across several areas.


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