Monday, August 8

A third of hedge funds in the US plan to invest in cryptocurrencies

An investigation by the accounting firm Ernst & Young reveals that 31% of hedge fund managers have planned to invest in bitcoin (BTC) and other cryptocurrencies.

The hedge funds (also called «hedge funds» or, in English «hedge funds») Are alternative or high-risk investment vehicles in which managers make investment decisions with fewer legal constraints.

The report on alternative investments, published this Monday, November 22, indicates that 24% of alternative investors and 13% of private equity funds contemplate the inclusion of cryptocurrencies in their respective portfolios (individual or of their companies) in a period of between one and two years.

Investment managers of the largest funds, those with assets under management in excess of $ 10 billion, and investors managing funds between $ 2 billion and $ 10 billion, They are the ones that show the greatest willingness to incorporate cryptocurrencies in their investment plans, agree to study.

In the area of ​​alternative investments, those that seek different paths to stocks, bonds or cash, options such as works of art, precious metals or the real estate sector have been considered, but cryptocurrencies have not found great receptivity.

Despite the fact that these are assets that generally have little correlation with traditional assets and attractive returns, just 7% of the fund managers interviewed by Ernst & Young claimed to have small percentages of cryptocurrencies in their portfolios.

78% of fund managers and investors consulted who have not invested in cryptocurrencies, point out that the main reason for discarding them is that they do not fit into their present or future investment plans and strategies. Other reasons cited for not venturing into bitcoin or other cryptocurrencies as an alternative investment vehicle are high volatility, regulatory uncertainty and poor understanding of this asset category.

Inclusion of small percentages of bitcoin significantly increases the returns of traditional portfolios. Source: Fidelity Digital Assets.

There are, however, numerous experiences that have studied the effect of the inclusion of bitcoin and other cryptocurrencies in traditional portfolios. Among the most frequent results, it has been found that small percentages of bitcoin show a substantial improvement in the returns of said portfolios.

Bitcoin: an asset that improves the return on investment portfolios

A study by Fidelity Digital Assets, published by CriptoNoticias in October 2020, established that alternative investments represent 12% of the world investment markets, and totaled some USD 13.4 billion in 2018.

On the other hand, the Fidelity study states that bitcoin is an uncorrelated asset that can serve to improve the risk-adjusted returns of traditional asset portfolios.

The research conducted a simulation of four scenarios between 2015 and 2020: a traditional portfolio with 60% stocks and 40% bonds and three portfolios that included 1%, 2% and 3% bitcoin, respectively. Compared with the annualized return of 6.83% of the portfolio without bitcoin, the remaining three obtained returns of 7.98%, 9.11% and 10.24% respectively.