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Hedge funds are looking to play bigger in crypto as a survey reveals that their portfolios may increase to $312 billion by 2026.
Hedge funds are looking to make big plays into the crypto sector as the sector continues to grow. According to a recent survey, these hedge funds will increase their exposure to cryptocurrencies by increasing their crypto portfolios over the next five years.
According to a recent survey of 100 hedge fund chief financial officers, the money managers intend to buy more crypto. The survey conducted by fund administrator Intertrust reveals that the CFOs hope to convert an average of 7.2% of their total assets to crypto by 2026.
The survey has revealed that hedge funds are closely watching the crypto industry and are looking to scoop more assets. The sector has been performing well, with top cryptos like Bitcoin (BTC), Ether (ETH), Binance Coin (BNB), and Dogecoin (DOGE) pulling in mouth-watering returns. At press time, BTC is currently trading at $40,000, after climbing 19% over the last five days. In year-to-date gains, BTC has pulled more than 38% and over 320% in the last year. While ETH boasts of a 247% YTD increase, DOGE has a whopping 6,821%.
Based on a forecast , Intertrust suggests that a 7.2% average would bring the global total to $312 billion. This figure could be higher as 17% of the respondents intend to hold over 10% of their assets in crypto.
Although the crypto space is considerably volatile, hedge funds do not mind the risk. According to Quilter Cheviot Investment Management’s executive director, David Miller, hedge funds understand the risk as well as the “long-term potential.”
Some Hedge Funds Are Worried about Crypto
Understandably, some hedge funds are still unsure. However, the survey shows that the increased appetite is different from the sentiment around traditional asset managers. Regardless, most traditional entities still worry about volatility. This might cause some delay in making a final decision on crypto.
Apart from the inherent volatility, traditional asset managers are also worried about crypto regulation. For the most part, regulation in the crypto space is decidedly unclear. Because of this uncertainty, many are unwilling to take the plunge since clear regulation could very easily go either way. Elliot Management recently wrote to its investors suggesting that the cryptocurrency sector could eventually become “the greatest financial scam in history.”
According to a recent asset management report, Morgan Stanley and Oliver Wyman said:
“For the moment, crypto investments remain limited to clients that have a high-risk tolerance and, even then, investments are typically a low proportion of investable assets.”
The Intertrust survey also revealed that executives in the UK, North America, and Europe intend to hold at least 1% of their portfolio in cryptocurrencies. The survey also shows that North American funds should have an average of 10.6%. On the other hand, European and UK funds should have 6.8%.