According to a recent report by PWC: AuM at Crypto Hedge Funds and Digital Asset acceptance among Traditional Hedge Funds continued to grow during 2021 with the former yielding healthy returns and maturing trading strategies familiar to the latter. The increased sophistication of the Crypto Specialist funds can be evidenced in experience of management, preference towards higher quality assets, and the interplay between of Digital Asset, on-chain/off-chain yield earning instruments, and traditional derivatives markets. With the hopes of further regulatory clarity, both Crypto Specialist and Traditional Hedge Funds are bullish about the long term future of Digital Assets and their value.
The Cayman Islands has maintained its position as the top location for crypto hedge funds to domicile, while the British Virgin Islands has overtaken the United States as the second most popular location. Each location saw its share of the market increase slightly year over year, Cayman Islands from 48% to 49% and British Virgin Islands from 11% to 13%. Gibraltar also surpassed the United States, despite both having a lower market share of 12% and 10% compared to 13% and 46% in the previous year respectively.
91% of survey respondents have acquired external auditors’ assistance in carrying out auditing work on their finance statements. This suggests that there is a general consensus within the crypto industry to adhere to compliance and regulatory requirements of traditional financial institutions and will serve the industry positively as it continues to mature in future.
The top three sectors that crypto hedge funds have invested into are Store of Value (86%), DeFi (78%), and Infrastructure (74%) based cryptocurrencies. The next tranche of sectors, Exchanges and Entertainment (51% & 48% respectively) have seen less adoption relative to the top three, while other sectors which can be seen as still rather niche in this market like Data & Cloud, Banking, Enterprise, have seen less than 30% of crypto hedge funds trade them.
Independent Directors for Crypto Funds
With an increasing focus by fund managers on appointing independent directors, it is no surprise that the report reflects the presence of independent board directors is seen as crucial for the good governance of crypto hedge funds. Their main goal is to keep managers in line with their fiduciary duties towards their clients – which is to make investment decisions that benefit unit holders. In addition, independent directors are generally seasoned professionals from various industries, bringing diversity to the board while also being able to help funds in their investment decisions. Bell Rock is a leading provider of independent directors and works with many crypto funds to bolster the fund governance framework.
To see a copy of the PWC report, please click here.
Bell Rock's Cayman - Crypto Fund Services
As a regulated fund services firm based in the Cayman Islands, we work extensively with crypto funds, with an in-depth understanding of Cayman fund regulatory requirements and developments in the crypto space, no matter the proposed crypto strategy, size of the fund or distribution. We also work as directors and supervisors to various blockchain projects and DAO's, at industry conferences and also work on traditional fund services for hedge funds, venture capital and private equity funds.
Some of the projects we have worked on:
Master-Feeder Fund for a market-neutral digital asset fund manager, with US based manager.
DeFI focused 100% on-chain fund
DeFI focused 100% on-chain fund.crypto hedge fund..
Algo/Quant Strategy Crypto Fund.
Arbitrage Crypto Fund.
BVI Approved manager formation and multi-strategy fund of crypto funds.
Cayman fund manager and registration.
VC focused blockchain fund - early stage blockchain projects
DAO focused treasury fund.
NFT Focused Fund.
For further information on our crypto fund services, please contact us: firstname.lastname@example.org