Hedge funds expect to hold about $312 billion in digital assets by 2026
Hedge funds plan to significantly increase their cryptocurrency holdings by 2026, reports Financial Times. In a survey by Intertrust among 100 hedge funds CFOs from around the world, they forecast to increase the assets to 7.2% in about five years. That could amount to a total of about $312bn of assets in cryptos, based on data group Preqin’s prediction for the total size of the hedge fund industry, according to Intertrust. Seventeen per cent of participants expected to have more than 10 per cent in crypto.
The highest appetite for risk has been demonstrated by hedge funds in North America with an average expected exposure at 10.6 per cent, while their UK and European counterparts expect 6.8 per cent on average.
The exact size of crypto investments by funds at the moment remains unclear, yet a number of well-known managers, like Paul Tudor Jones or billionaire Alan Howard, a co-founder of Brevan Howard fund, have bought into Bitcoin.
Bitcoin has become the main contributor to revenue to US fund firm SkyBridge Capital, let by former White House communications director Anthony Scaramucci. The company invested in cryptocurrency at the end of 2020 and successfully scaled down its holdings in April right before a major plunge in Bitcoin price.
Yet, not all hedge funds share optimism about Bitcoin and altcoins, owing to their high volatility and regulatory uncertainty. Paul Singer’s Elliott Management in a letter to investors earlier this year wrote that cryptocurrencies are possibly “the greatest financial scam in history”.
While the regulation of cryptos is still going through its development phase, last week the Basel Committee on Banking Supervision stated digital assets should carry the toughest bank capital rules of any asset.