PWC Global Crypto Hedge Fund Report (2023)

The annual PwC Crypto Report is produced in collaboration with CoinShares and the Alternative Investment Management Association (AIMA). The report presents insights derived from two separate surveys:

(i) Traditional hedge funds survey

(ii) Crypto hedge funds

The PwC report at a glance:

• The number of traditional hedge funds investing in crypto fell to 29% (37% in 2022)
• Traditional hedge funds don’t plan to decrease their exposure in the crypto market
• 23% of traditional hedge funds are reassessing their crypto strategy due to the regulatory environment in the US
• 93% of crypto hedge funds expect the crypto market to be higher at the end of 2023 than by 2022
• 31% of traditional hedge funds view tokenization as the biggest opportunity in 2023
• 91% of traditional hedge fund investors who have crypto-asset exposure are only invested in Bitcoin and Ethereum (67% last year)
• No traditional hedge fund is reporting to invest in NFTs (compared to one in five in 2022)

The percentage of traditional hedge funds investing in the crypto market declined in 2023. However, there remains strong confidence in the long-term value proposition of the industry. This optimism is evident as all traditional hedge funds currently invested report that they intend to either maintain or increase their exposure. This positive outlook persists despite ongoing concerns about regulatory barriers and market volatility. Notably, 93% of all crypto hedge funds expect the crypto market to end 2023 at a higher level.

However, there is also skepticism

More than two-thirds (71%) of the traditional hedge funds surveyed are not currently invested in crypto-assets (63% in 2022):

• 54% of respondents say they are unlikely to invest over the next three years (41% in 2022)
• 37% of traditional hedge funds that do not invest are awaiting further asset maturity (30% reported in 2022)

The main reasons:

(1) client reaction or reputation risk

(2) lack of regulatory and tax clarity

(3) insufficient or unreliable third-party data

(4) outside the scope of the current investment mandate

Regulatory Framework

More than half of those surveyed claimed that they would likely invest more in digital assets once greater transparency, regulatory certainty, and risk management is in place. Crypto hedge funds need greater transparency and specific regulatory requirements:

• Mandatory segregation of assets (75% of all survey respondents)
• Mandatory financial audits (62%)
• Independent statement of reserve assets (60%)
• Liquidity concerns (21% of crypto hedge funds surveyed)
• Counterparty risk management processes (53%)

Tokenization as an emerging opportunity

Traditional hedge funds are showing an increased interest in tokenized assets and securities:

• 25% of traditional hedge funds surveyed are exploring tokenization
• 31% of traditional hedge funds surveyed noted tokenization is the most significant growth opportunity in the crypto-asset industry

■ ExpertSignal.com (July, 24th 2023)

Source: https://www.pwc.com/gx/en/news-room/press-releases/2023/pwc-2023-global-crypto-hedge-fund-report.html