Cryptocurrency hedge funds gained close to 24% last month thanks to huge swings in the price of digital assets, the Financial Times (FT) reported Tuesday (Sept. 14). Those increases helped the funds outpace investors in equities and currencies markets.
Funds focused on bitcoin and other digital currencies have returned 145% this year, according to the report, which cited data from Eurekahedge.
While crypto occupies a smaller corner of the hedge fund world, the potential return on digital assets has investors looking to crypto for opportunities that aren’t available elsewhere, the report stated.
“Crypto has two features that make performance potential great for hedge funds involved in it: volatility and inefficiency,” Francesco Filia, CEO of the hedge fund Fasanara Capital, which has invested in cryptocurrencies, told FT. “The combination of the two allows for outperformance of traditional asset classes.”
So far this year, crypto funds have had one bad month, according to the report. In June, they lost 10%. They gained close to 7% in May despite a volatile time for bitcoin prices. That month saw bitcoin trading above $63,000 before plummeting to below $30,000.
Meanwhile, hedge funds that focus on currency trading saw a 0.59% return in August, while funds trading equities reported a 0.8% yield.
Digital assets have caught the attention of several traditional hedge funds. The Brevan Howard hedge fund announced plans this week to expand into crypto. The fund, known for betting on macroeconomic trends, said it plans to launch a new unit, BH Digital, which will manage crypto.
“Two years ago, most large hedge funds stayed away from crypto as they were worried about the reaction of their existing investors,” Henri Arslanian, crypto lead at PwC in Hong Kong, told FT. “Now these same hedge funds are worried that if they don’t at least explore crypto, they will be criticized by their existing investors.”