Hedge Funds’ Long-Term Crypto Interest Remains Robust Even as Proportion Investing Drops: PwC

The proportion of traditional hedge funds investing in crypto assets declined in the past 12 months though the long-term outlook remains positive, according to a new report by Big Four accounting firm PricewaterhouseCoopers (PwC).

The percentage of funds with crypto exposure fell to 29% from 37% in 2022, according to the Global Crypto Hedge Fund Report. No traditional hedge funds plan to decrease their exposure this year, it said.

More than a third (37%) of funds without crypto exposure said they are curious, but are waiting for the asset class to mature further. That’s up from the 30% reported a year ago. More than half, 54%, said they are unlikely to invest in the next three years, compared with 41% in the previous report.

Overall, the report speaks to a mixed sentiment toward crypto from traditional financial institutions, with “regulatory uncertainty” the watch words, as is often the case. PwC found that almost a quarter of hedge funds are reassessing their strategies due to the regulatory environment in the U.S., with 12% considering relocating from the U.S. to more crypto-friendly jurisdictions.

“Despite market volatility, a fall in digital asset prices and the collapse of a number of crypto businesses, investment in crypto-assets is expected to remain strong in 2023,” Jon Garvey, PwC United States’ global financial services leader, said. “Traditional hedge funds, committed to the market in the longer term, are not only increasing their crypto-assets under management, but also maintaining – if not increasing – the amount of capital deployed in the ecosystem.”