Cryptocurrency And Blockchain-Focused Strategies to Push Hedge Funds Up in 2018
The explosive growth of the blockchain technology and cryptocurrencies will push the growth of hedge funds in 2018.
The hedge funds space had a great run in 2017, and this momentum will be sustained in the coming year, driven by cryptocurrency and blockchain focused strategies, said data provider Hedge Fund Research (HFR).
"We had anticipated a continuation of this favorable trend in new launches which we expect to continue with the added tailwind of growth not only from risk parity and risk premia strategies, but also from funds focused on Asian and emerging markets, technology, healthcare and activist, as well as from managers specializing in blockchain and cryptocurrency investing. This powerful industry evolution and growth trajectory is very likely to accelerate in 1H18."
According to Heinz, 2017 is the year of recovery for the hedge fund industry, with better returns, lower costs, and rise in the number of launches that exceeded liquidations for the first time in two years.
The latest HFR Market Microstructure Report showed the number of hedge fund launches jumped to 176 in the third quarter compared to 170 launches in the same period last year. At the same time, the number of liquidations fell sharply in the period to 137, representing a steep and favorable decline over both the prior quarter's total of 222, as well the 252 liquidations in 3Q16.
Year-to-date through September 30, there were 618 liquidations and 545 launches, a substantial narrowing over FY 2016, when 1,057 funds liquidated and 729 were launched.
Hedge Funds Invest $2 Billion in Cryptocurrency in 2017, More Next Year
An independent report by Morgan Stanley entitled "Bitcoin Decoded" sent out to clients early last week, the investment bank estimates investments made by cryptocurrency-focused hedge funds reached $2 billion this year, reports Business Insider. Morgan Stanley expects more money to be pumped by hedge funds into cryptocurrency in the coming 2018.
Morgan Stanley used data from consultancy firm Autonomous NEXT as well as its own research.
Crypto World Has Been Good to Hedge Funds
Fortunately for the wealth management sector, an exponential growth of the digital currency industry has been extremely rewarding.
Cryptocurrency-focused hedge funds have left all strategies in the dust with their phenomenal 1,522% gains so far this year. The massive returns of the crypto hedge funds overwhelm the industry average of 7.2% during the same period.
"Investor interest in funds offering exposure to blockchain technologies and cryptocurrencies has surged in recent months as these innovations continue to move towards the mainstream and generate compelling opportunities for investors, portfolio managers, traders and other market participants," Heiz said.
Pantera Bitcoin Fund, one of the first fund dedicated to virtual currencies, reported a 25,004% returns this year. The fund credits the skyrocketing price of bitcoin for its unprecedented performance
HFR Launches Blockchain Hedge Fund Index
Anticipating that blockchain technology and cryptocurrencies will sustain their explosive growth, HFR announced early this month the launch of two new indices, the HFR Blockchain Composite Index and the HFR Cryptocurrency Index, the first family of indices designed to capture performance of hedge funds investing in this rapidly evolving space.
The HFR Blockchain Composite Index includes funds that invest directly in blockchain technology, cryptocurrency or other emerging blockchain innovations. The HFR Cryptocurrency Index, a sub-strategy index of the Blockchain Composite, includes all funds which invest and trade in cryptocurrency directly.
Those funds are typically generating performance through an actively managed portfolio of cryptocurrency assets, including Bitcoin, Ethereum, Litecoin, Ripple and many other coins, as well as new initial coin offerings (ICOs).
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