Hedge funds expect to hold $310 billion in cryptocurrencies within 5 years – more than 7% of their assets

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Institutional interest in cryptocurrencies like bitcoin has jumped in 2020.

  • Hedge funds plan to ramp up their crypto holdings to more than 7% of assets by 2026, a survey showed.
  • That would equate to around $313 billion of cryptocurrency holdings, Intertrust Group said.
  • Hedge funds have been drawn to the volatility and huge price rises in cryptocurrencies such as bitcoin.
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Hedge fund bosses are planning to ramp up their holdings of cryptocurrencies, predicting that an average of 7.2% of their assets under management will be held in digital tokens by 2026, a survey has found.

That would equate to around $313 billion of cryptocurrency holdings, based on an estimate of the future size of the hedge fund industry, according to Intertrust Group, which carried out the research.

The finding is a sign that many potential institutional buyers are not being put off by bitcoin’s recent plunge, but see cryptocurrencies as a long-term strategy.

“Certain cryptocurrencies, such as bitcoin and ethereum, have delivered incredible – albeit volatile – performance in recent years,” said Jonathan White, global head of fund sales at Intertrust, a Netherlands-based professional services group.

“Inevitably, they have drawn growing interest from hedge funds as well as institutional and retail investors.”

Intertrust’s survey, first reported by the Financial Times, found that one in six respondents expect their funds to have more than 10% in cryptocurrencies in five years’ time. Just shy of all respondents said they expect to have at least some crypto investments by then.

The company polled 100 chief financial officers at hedge funds around the world, with average assets under management of $7.2 billion.

North American hedge funds were the most bullish on crypto, predicting that they would hold around 11% of their assets in digital tokens by 2026.

Given the secretive nature of the hedge fund industry, it’s unclear how much crypto exposure these institutions currently have. Yet most hedge funds that have moved into the space have only committed a small amount. For example, Brevan Howard plans to invest up to 1.5% of its main $5.6 billion fund in cryptocurrencies, it said in April.

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$14 billion hedge fund Brevan Howard set to start buying cryptocurrencies, as institutional interest booms

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Bitcoin’s huge price rises have drawn in traditional investors.

Brevan Howard, one of Europe’s largest hedge funds, is set to become the latest big-name investor to start buying cryptocurrencies.

The $13.7 billion fund’s managers have decided the cryptocurrency market has matured sufficiently to start investing for its clients, according to a person familiar with the matter.

Brevan Howard has set up a new fund which will start to invest in digital assets, the person said. It will be overseen by crypto investment firm Distributed Global’s co-founders Johnny Steindorff and Tucker Waterman.

The person said the hedge fund is looking to invest in a range of assets, not just bitcoin. Bloomberg, which first reported the news, said Brevan would initially invest up to 1.5% of its main $5.6 billion fund in cryptocurrencies.

The hedge fund already has some exposure. It bought a 25% stake in One River Asset Management, which runs a number of cryptocurrency funds, in 2020.

Co-founder Alan Howard has backed companies including British bitcoin payments app Bottlepay and has been an investor in Distributed Global since 2018.

Hedge fund bosses including Mike Novogratz and Paul Tudor Jones have made lucrative bets on the digital assets. Companies including Tesla, BlackRock and JPMorgan are getting involved.

Hedge funds focusing on cryptocurrencies have been the star performers of the industry in 2021.

Data from Eurekahedge on Wednesday showed crypto funds gained 116.8% in the first quarter, outstripping bitcoin’s 104.2% return. Global hedge funds were up 4.8% in the first 3 months of the year.

Bitcoin, the world’s biggest cryptocurrency, hit an all-time high close to $65,000 on Wednesday ahead of the $100 billion public listing of crypto exchange Coinbase on the Nasdaq.

The massive price rise has drawn in some of the biggest names on Wall Street. BlackRock has given two of its funds permission to invest in crypto derivatives, while Goldman Sachs has restarted its crypto trading desk.

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