On Wednesday (8 August 2018), Crypto Fund Research, a provider of proprietary research and market intelligence on the cryptocurrency investment industry, released a report showing that new crypto funds are being launched at a record pace. Here, we examine some of the highlights from this report.
It seems that falling cryptocurrency prices and an uncertain regulatory environment during the first seven months of 2018 did not stop 96 new crypto hedge funds and venture capital funds from getting launched. If this trend ("an annual pace of 165") continues, we are on pace to break the record set in 2017 (when 156 crypto funds were launched).
Globally, at the present time, there are 466 crypto funds, with roughly 55% of these being hedge funds, 42% venture capital funds, and 3% private equity funds:
Josh Gnaizda, founder of Crypto Fund Research says:
“We expected a large number of new crypto funds to launch in 2018 to satisfy growing investor demand. However, the pace of new fund launches is a bit surprising given the dual headwinds of depressed prices and less than favorable regulatory conditions in many regions... While volatility in the crypto markets can attract some investors to sophisticated crypto funds, it remains unclear if the industry can support such a large number of funds, with limited track record, if we experience an extended bear market.”
Although crypto funds are "the fastest growing hedge fund strategy by number", total assets under managment (AUM) by crypto funds is aproximately $7.1 billion, which pales in comparison with the AUM of any of the top 10 traditional hedge funds in the U.S. (e.g., the fourth-largest, JPMorgan Asset Management, which has $47.7 billion AUM). This is partly because most of the major institutional investors in the U.S. have so far largely stayed away from the crypto markets mostly due to lack of regulatory clarity and lack of SEC-approved qualified crypto custodians. Of course, if a crypto ETF gets approved by the SEC, some of the institutional money currently sitting on the sidelines will come into play.
It is interesting to note that Crypto Fund Research found that this year the top cities in the world for launching crypto funds have been:
- San Francisco (nine)
- New York (six)
- Singapore (five)
- London (four)
Here is a chart showing the breakdown of crypto funds by the country in which they are based:
Finally, it is worth mentioning that Crypto Fund Research, in addition to its high quality research reports, provides a quite valuable resource: a constantly updated database (in Excel format) of all crypto funds, called the "Crypto Fund List", which covers more than 30 categories of information.
Image Credits: All Images Courtesy of Crypto Fund Research