Hedge funds deepen crypto exposure on greater regulatory clarity, survey finds

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Hedge funds ramped up their exposure to digital assets this year, with over half now reporting holding some form of crypto exposure, a notable uptick driven by growing confidence in global policy support, according to an industry survey published Thursday.

With the increased perception that digital assets are becoming part of mainstream finance, some 55% of global hedge funds hold crypto-linked assets, compared with 47% a year earlier, per the survey of 122 institutional investors and fund managers conducted by the Alternative Investment Management Association ("AIMA") in the first half of the year.

The rise has been "supported by increasing regulatory clarity and new legislation in the US, as well as with the emergence of regulatory regimes covering the sector across many other globally important financial markets, including the EU, Hong Kong, Singapore, Switzerland and the UAE," the report said, marking a shift "from years of enforcement-led uncertainty toward a more defined and innovation-friendly regulatorylandscape."

Funds' digital assets exposure ranged from direct crypto trading and derivatives to exchange-traded funds, crypto bankruptcy claims, and a growing interest in tokenized assets and equities.

Even with Trump's crypto push, the market has delivered modest relative gains this year. Bitcoin (BTC-USD [https://seekingalpha.com/symbol/BTC-USD]), the world's largest token, has gained ~9% year-to-date, trailing the S&P 500's (SP500 [https://seekingalpha.com/symbol/SP500]) 16% climb and gold's (XAUUSD:CUR [https://seekingalpha.com/symbol/XAUUSD:CUR]) 53% surge. Altcoin kind Ether (ETH-USD [https://seekingalpha.com/symbol/ETH-USD]) barely budged YTD, inching up less than 1%.

Meanwhile, around half of hedge funds surveyed with no current crypto exposure signaled no plans to enter the market in the near term.

"Despite improved regulatory clarity, lingering tax and investor mandate barriers echo 2024 themes, signaling that investor education and internal flexibility remain key," the report said [https://www.aima.org/compass/insights/digital-assets/7th-annual-global-crypto-hedge-fund-report.html]. "If these mandates and other barriers were removed, roughly half who polled would consider investing."

The hedge funds and investors in the survey had an estimated aggregate of $982B in assets under management.

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