Friday, September 17, 2021

Hedge fund riding crypto wave post bumper returns

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Cryptocurrency hedge funds rose nearly 24% in August as sharp fluctuations in digital asset prices outpaced investors in sleepy equities and currency markets.

Fast-paced profits mean that Bitcoin and other digital asset-focused funds have returned 145% this year, according to Eurekahedge data.

Cryptography is a relatively small niche market in the hedge fund industry, mostly focusing on fixed income, commodities and other more established asset classes. However, the runaway returns available on digital assets have caught the eye of funds looking for opportunities that are often lacking elsewhere.

“Cryptocurrencies have two characteristics that increase the performance potential of the hedge funds involved: volatility and inefficiency,” said Fasanara Capital, a hedge fund with assets in excess of € 1.5 billion. Francesco Philia, Chief Executive Officer, said. Cryptocurrency.

“The combination of the two enables us to outperform traditional asset classes.”

June marked the only retreat of this year’s cryptocurrency, which lost 10%. Bitcoin prices rose nearly 7% in May, despite halving from record highs. Bumper’s year follows digital asset professionals returning more than 200% in 2020.

According to Eurekahedge, strong returns are in contrast to the 0.59% returned by hedge funds specializing in currency trading in August and the 0.8% generated by funds trading equities.

Since the beginning of this year, the price of Bitcoin, the most widely used cryptocurrency, has fluctuated significantly. After opening near $ 29,000 in 2021, it hit a series of highs. In May, Bitcoin fell below $ 30,000 after trading above $ 63,000. Digital coins are currently trading at $ 46,017.

These swings provided traders with plenty of opportunities to bet. In contrast, the currency and stock markets remained quiet as low interest rates in major economies restrained significant price fluctuations.

The massive move in digital assets has caught the eye of more and more large traditional hedge funds that are taking a tentative step towards becoming active in the crypto market. On Monday, Brevan Howard, one of the world’s largest global macro hedge funds, announced Said It will launch a digital business to explore cryptocurrency opportunities.

“Two years ago, most large hedge funds were moving away from cryptocurrencies because they were worried about the reaction of existing investors. Now these same hedge funds have to at least explore cryptocurrencies. I’m worried that existing investors will criticize me, “said Henri Arslanian, PwC’s crypto reader in Hong Kong.

However, making money in the cryptocurrency market is becoming increasingly difficult, and many native digital asset funds have risen towards arbitrage and market-neutral strategies as they rely on Bitcoin prices and are juicy. Profitable.

According to data compiled by James Butterfill, an investment strategist at Digital Asset Manager Coinshares, there are still three times as many passive funds as active management strategies, but the latter is far superior in terms of returns.

“Cryptographic arbitrage opportunities are particularly interesting because they avoid large volatility and uncertainty in cryptocurrency directional strategies,” Philia said.

Hedge fund riding crypto wave post bumper returns

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