The reports reveal that several traditional hedge funds continue to invest in cryptocurrencies even though the crypto market went through a bearish trend for most of 2022.
89 hedge funds took part in a survey conducted in Q1 2022, as per the 4th Annual Global Crypto Hedge Fund report by PricewaterhouseCooper (PwC).
According to the research, 38% of the traditional hedge funds have already made an investment in digital assets, a rise of 21% from the previous year. Meanwhile, two-thirds of the funds involved in the survey are planning to further their allocation by the year-end.
Brevan Howard, a British hedge fund giant, intended to allocate 1.5% of its funds to various digital assets last April. According to a survey conducted in 2021, 100% of hedge funds plan to invest on average around 7.8% of their portfolios into digital assets by 2026.
In comparison to 79% in the previous year, Traditional hedge fund managers not doing crypto investments have decreased to 62%. 29% of those who are not investing in crypto are either at the last stage of their investment plans or are making plans to invest.
The PwC report also noted that the creation of new entities at an accelerated rate in the last two years has taken the number of crypto hedge funds to 300 globally.
The leading cryptocurrency, Bitcoin is the most-traded crypto asset, Ether comes at 2nd position. Followed by Solana, Polkadot, Terra, and Avalanche.
Biggest Hindrance According to Hedge Funds
Though the number of traditional hedge funds adopting crypto is increasing, they are seen to be cautious. The survey revealed that around 57% allocated less than one percent of their total assets under management (AUM) to crypto assets.
41% of the entities believe that it is very unlikely that cryptocurrencies will be able to gain such exposure in the next three years. While 31% are waiting for the crypto market to become mature. Hedge funds see the absence of tax and regulatory clarity as a major challenge in the crypto industry.
However, John Garvey, Global Financial Services Leader, noted that even though risks and high volatility are associated with crypto markets, traditional hedge funds continue to make crypto investments.
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Source: https://www.thecoinrepublic.com/2022/06/12/high-volatility-risks-couldnt-hold-back-traditional-hedge-funds-from-investing-in-crypto-assets/