Hedge Fund Update
Sign up for myFT Daily Digest and be the first to learn about hedge fund news.
Cryptocurrency hedge funds rose nearly 24% in August, as the sharp fluctuations in digital asset prices helped them outperform investors in weak stock and currency markets.
According to Eurekahedge’s data, strong gains mean that funds focused on Bitcoin and other digital assets have returned 145% this year.
Crypto is still a relatively small niche market in the hedge fund industry, with most still focusing on bonds, commodities and other more mature asset classes. But the runaway returns in digital assets are attracting the attention of funds looking for opportunities that are usually lacking elsewhere.
Francesco Filia, CEO of Fasanara Capital, said: “Cryptocurrencies have two characteristics that make participating hedge funds show great potential: volatility and inefficiency.” Hedge funds with assets of more than 1.5 billion euros, some of them are Assigned to cryptocurrency.
“The combination of the two makes traditional asset classes perform better than traditional asset classes.”
June was the only setback for crypto funds this year. They lost 10%. Although Bitcoin prices have fallen by half from their historical highs, they still rose by nearly 7% in May. After the digital asset experts have returned more than 200% in 2020, a bumper year is ushered in.
According to data from Eurekahedge, the return rate of hedge funds that specialize in currency trading in August was 0.59%, while the return rate of stock exchange funds was 0.8%. In contrast, the strong return rate is in stark contrast.
Since the beginning of the year, the price of Bitcoin, the most widely used cryptocurrency, has fluctuated sharply. It started trading at nearly $29,000 in 2021, and then set a series of all-time highs. In May, the Bitcoin transaction price was above 63,000 USD and then fell below 30,000 USD. The current trading price of the digital coin is US$46,017.
These fluctuations provide traders with a large number of opportunities to place bets. In contrast, the currency and stock markets have remained calm as the low interest rates of major economies have suppressed large price fluctuations.
The large volatility of digital assets has attracted the attention of more and more large traditional hedge funds, which have been tentatively moving towards being active in the cryptocurrency market.Brevin Howard, one of the world’s largest macro hedge funds, Monday Said It will build a digital business to explore the opportunities of cryptocurrency.
“Two years ago, most large hedge funds stayed away from cryptocurrencies because they were worried about the reaction of existing investors. Now, these hedge funds worry that if they at least explore cryptocurrencies, they will be criticized by existing investors,” Pu According to Henri Arslanian, Head of Cryptocurrency at China Dynamics Road in Hong Kong.
But it is becoming more and more difficult to make money in the cryptocurrency market. Many local digital asset funds have switched from relying on the price of Bitcoin to arbitrage and market-neutral strategies to make huge profits.
Data compiled by James Butterfill, an investment strategist at CoinShares, a digital asset management company, shows that the number of passive funds is still three times that of active management strategies, but the latter perform better in terms of returns.
Filia said: “Crypto arbitrage opportunities are particularly interesting because they avoid the huge volatility and uncertainty of crypto-directed strategies.”
For the latest news and views on Fintech from the Global Correspondent Network of the Financial Times, please subscribe to our weekly newsletter #fintechFT