In the past year, virtual money is becoming more mainstream amid increased attention on the market due to the spectacular rise of the most well-known cryptocurrency Bitcoin. It rose from $3,775 in November 2018 to a high of around $64,000 in November 2021 and has fallen to a current price of around $19,000.
But big hedge funds and asset managers have so far been reluctant to move into the sector. Mercer, which advises pension funds and other investors, said in February 2022 that cryptocurrencies were not worth investing in.
Fund Managers’ Views
Some bottom-up fundamental stock picks consider cryptocurrencies to be speculative tools. Austin Hawley, manager of Diamond Hill Large Cap (DHLRX), said that most people seem to use them. He no longer sees a compelling, long-term investment case for them because, unlike traditional stocks or bonds, digital currencies don’t generate cash flows, making it difficult to determine their intrinsic value.
Others look at crypto to see how it might impact their portfolios. Janis Henderson Enterprises (JMGRX) co-managers Brian Damien and Cody Wheaton don’t see many investment opportunities, but they are looking to see how blockchain technology could disrupt or influence the adoption of their current holdings. can do Broadridge (BR), a provider of communications and technology services to financial companies.
Matt Dennis, commander of Invesco International Growth (AIIEX), also thinks Ethereum has more potential than Bitcoin. He says it has more uses and admits there is a clear demand for alternative stores of value. But in general, he’s more interested in blockchain technology than cryptocurrencies themselves, saying there’s a lot going on behind the scenes with blockchain that can only be seen in the well-documented volatility and volatility surrounding bitcoin. Not to be dismissed out of over-zealousness.
Numbers and figures.
The number of traditional hedge funds not investing in crypto assets fell to 62% of respondents, down from 79% a year ago. About a third, or 29%, of hedge fund managers not yet investing in digital assets said they are in the final stages of investing or planning to invest.
The number of crypto-focused hedge funds has likely grown to more than 300 globally, with half launched in the past three years. The 300 funds are a small slice of the overall hedge fund market, with 8,259 funds globally in the first quarter. Although more traditional hedge funds are getting into crypto, most are still cautious. According to the survey, 57% allocated less than one percent of their total assets under management (AUM) to cryptocurrencies.
In addition, 41% of asset managers not investing in digital assets said they are unlikely to gain such exposure in the next three years. Another 31% are curious about cryptocurrency but prefer to wait until the market reaches firmer maturity. Meanwhile, regulatory uncertainty was the biggest barrier for respondents not involved in crypto-investment, while hedge funds with such exposure said the absence of tax and regulatory clarity was a major challenge.