Crypto Funds Performed Better Than Hedge Funds & Digital Asset Indices
Crypto funds delivered better returns than traditional hedge funds, according to data from Hedge Fund Research.
Despite a large rally in stocks during 2021 did not translate into huge returns at some of the world’s largest hedge funds. However, their crypto counterparts were able outperform both stock and digital asset indices.
In aggregate, hedge funds returned just over 10% last year, underperforming the S&P 500 index’s return of 26.9% as well as the aggregate performance of hedge funds in 2020. The lower results of hedge fund managers happened due to their underexposure to big tech names like Apple and car-maker Tesla, which yielded massive returns in 2021.
Even top hedge funds like Ken Griffin’s Citadel performed on par with the broader market. Citadel delivered a 26% return for 2021, Bloomberg News reported.
However, crypto funds’ performance was in a completely different level, according to data provided by Hedge Fund Research. According to HFR’s crypto index crypto hedge funds returned, on average, 214% during 2021. This represents the second best performance for crypto hedge funds – only behind the 2017 boom cycle – since the firm started tracking crypto fund performance in 2015.
The performance is not only strongly related to their equity brethren, but is also strongly related to some accepted benchmarks. Bitcoin returned 48.5% over the course of 2021. The Bloomberg Galaxy Crypto Index, meanwhile, posted a return of 153.39%. TCAP, a cryptocurrency that leverages oracles to track the entire market, shot up 185% during 2021.
However, individual crypto assets like Ethereum (ETH) outperformed funds, with the native asset of the second-largest network by market capitalization clocking in a return of more than 400% in 2021.
The solid performance of hedge funds in the crypto market might be a function of the lack of competition in the market relative to equities, according to Jeff Dorman, the chief investment officer at crypto investment management firm Arca. He said;
“TradFi Hedge fund portfolios look very similar, and passive indexes largely outperform active management in today’s picked over market. Contrast that to digital assets, and there really isn’t much competition at all yet.”
According to Dorman most Wall Street institutions are focused completely on Bitcoin (BTC) and ETH, leaving opportunities among the mid-cap tokens available for crypto funds.
He elaborated:
“The sweet spot for active management is a growing and evolving investment opportunity set without growing competition, and that’s where we stand today.
Due to regulatory issues, size constraints, and lack of education, large TradFi funds have not penetrated digital assets in any meaningful way outside of buying a few private deals, and trading BTC and ETH.”
