PwC finds crypto funds showing growing interest in the DeFi sector

The assets under management (AUM) of crypto hedge funds rose in 2020 from $2 billion to $3.8 billion, and DeFi protocol tokens were widely distributed across portfolios. This is according to a PwC report.

According to the study, Chainlink was held by 30% of funds, Aave by 28%. For comparison: Ethereum was held by 67%, Bitcoin by 97%.

“Although funds may still be far from using decentralized applications, they are trying to understand the potential impact that DeFi could have on the future of financial services,” said PwC Global Crypto head Henri Arslanian.

31% of crypto funds used non-custodial platforms, such as Uniswap (16%), 1Inch (8%) and SushiSwap (4%).

42% earned from staking, 33% from crypto lending operations, 24% raised debt financing.

56% of the sampled structures trade derivatives, but only 28% use short positions.

The average fund return for 2020 stood at 128%, up from 30% in 2019.

The median AUM for the year rose from $3.8 million to $15 million. The client base of the structures comprises high-net-worth individuals (54%) or family offices (30%), with a median investment size of $400,000.

The PwC study was conducted with Elwood Asset Management and the Alternative Investment Management Association. The consultancy believes the latter’s involvement could popularise cryptocurrencies among traditional asset managers.

The report states that 21% of “classic” hedge funds with $180 billion AUM have already invested in the new class of instruments, on average 3% of assets, with 85% of them planning to grow this share. 26% do not rule out adding cryptocurrencies in the future.

Regulatory uncertainty as a barrier to investing in digital assets was mentioned by 82% of hedge fund managers. For 77%, potential negative client reaction and reputational risk are the problem, and 64% reported a lack of the necessary knowledge.

Blockstream acquired the Adamant Capital cryptocurrency fund, founded by Bitcoin maximalist Tuur Demeester.

3rd Annual Pwc Elwood Aima … by ForkLog

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