According to a report out the other day, over 70 new hedge funds are in the process of being created.
Not just any hedge funds, but crypto specific hedge funds.
According to Corey McLaughlin (manager at Arthur Bell), he's never seen anything like it:
"I've been in the hedge fund space since 1998, and I've never seen anything like it in volume of launches in a particular area. It's just crazy."
So, he was around during the tail end of the Dot.com bubble as well as the 2008 Financial Meltdown yet he has never seen anything like this in the hedge fund space?
Hedge Funds in general often follow the herd mentality, especially in regards to their focus.
They routinely are looking for the next "hot" thing.
They are often cited as being some of the brightest and the best investors out there, which is true to some degree, but it also should be noted that they rarely beat the S&P market index.
In fact, this is probably one of the main reasons they are chasing cryptocurrencies to begin with. They look at their returns over the past couple years and they see that they can't beat the S&P index funds, so they need to find new investment vehicles to spice up their gains.
Since most funds have a specific investment thesis stated with the creation of their fund, they can't just deviate within that fund to new investment products.
Well technically they can do whatever they want, but they risk losing investor support, so it's kinda the same thing...
What do they do?
They create entirely new funds dedicated to these new products!
More tools at their disposal.
The good news for hedge funds is that they will have a wealth of hedging vehicles that most funds before them didn't really have access to, especially those located in the United States.
Specifically, I am referring to futures products and options, you know, derivatives.
More about those can be read here:
In fact one could probably make the argument that some of these funds are only able to enter the market NOW that these new tools are becoming available.
A sign of demand.
Either way, all these new funds signify the kind of demand there is out there for cryptocurrencies. If investor money wasn't pouring into the space we wouldn't be seeing all these new funds being created.
We are riding a pretty strong wave ladies and gentleman, we need to make sure we enjoy it while it is here! :)
Follow me: @jrcornel