N E W LA U N C H E S
READY TO LAUNCH? COSTS AND COMPLEXITY UNDER THE SPOTLIGHT Roughly a third of hedge fund managers are considering launching a digital assets-focused strategy over the next 12 months, underlining the depth of appetite
W
ith such a sizable chunk of the hedge fund community keen to step into this fastpaced, constantly-evolving sector, the scale of the challenges confronting prospective market entrants are coming into ever-sharper focus, with those having already made the splash flagging up an assortment of costs and complexities posed by the 24/7 nature of crypto. Hedgeweek quizzed more than 50 alternative investment firms, managing a range of hedge fund strategies across the globe, on their interest in digital assets, as well as on the perceived barriers and risks within the market. The survey findings show around 30 per cent of the sample are preparing to roll out a digital assetsfocused fund in the next 12 months, with a further 7.5 per cent “possibly” launching within the same timeframe. The data also hints at the growing
interest in crypto among allocators and the extent of investor inquiry, with close to 39 per cent of respondents said they have been asked by allocators to offer a digital assets vehicle. Against this backdrop of surging interest on both sides of the manager-investor dynamic, and the prospect of a slew of new participants in the coming year, crypto-focused hedge funds say the process of successfully launching and running a crypto-focused hedge fund can be a challenging and sometimes painful exercise.
Vast space
Indeed, one in five participants in Hedgeweek’s study pinpointed launch costs and complexity as the greatest obstacle to launching crypto strategy currently. One respondent who said they were “possibly” launching a fund
this year described digital assets as a “vast space with a lot of new knowledge to be learned.” Another manager, not planning to enter the market, fears a “loss of credibility from doing something quite different from core strengths.” Those crypto managers on the front-line point to higher startup costs, with the asset class demanding a sizable technology spend, along with the ability to source service providers that offer crypto capabilities, and find the talent and expertise within the sector. “The overhead costs that a crypto hedge fund has are significantly higher compared to a more traditional, say, long/short equity fund which is based on fundamental analysis,” says Carlos Betancourt, founding principal at New York-based BKCoin Capital, who flags up tech costs as a key issue. The 24/7 round-the-clock nature of
Do you plan to launch a digital assets hedge fund strategy in the next 12 months?
Yes 31%
No 61% Possibly 8%
Source: Hedgeweek readers survey, January 2022
Made with
H E D G E W E E K IN S IG H T R E P ORT
6
