Crypto funds outperformed traditional hedge funds and digital asset benchmarks

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A strong rally in equities during 2021 hasn’t translated into outsized returns for some of the world’s largest hedge funds. But their crypto counterparts have been able to produce higher returns than stock and digital indices.

Overall, hedge funds returned just over 10% last year, underperforming the S&P 500 Index return by 26.9% as well as the overall performance of hedge funds in 2020. The lagging results of hedge fund managers are linked to their underexposure. big names in tech like Apple and automaker Tesla, which have seen stunning returns in 2021.

Even the best hedge funds like Ken Griffin’s Citadel have performed on par with the market in general. Citadel achieved a 26% return for 2021, according to Bloomberg News.

It’s a different story for crypto funds, according to data provided by Hedge Fund Research. The company’s crypto index suggests that crypto hedge funds returned, on average, 214% in 2021. Aside from the 2017 expansion cycle, this represents the best performance for crypto hedge funds since the company started tracking this particular subset in 2015.

Indeed, the performance is not only strong against their equity brethren, but is also strong against some accepted benchmarks. Bitcoin returned 48.5% during 2021. The Bloomberg Galaxy Crypto Index, meanwhile, returned 153.39%. TCAP – a cryptocurrency that uses oracles to track the entire market – gained 185% in 2021.

Still, cryptos like Ether outperformed funds, with the second-largest network’s native asset by market cap recording a return of over 400% in 2021.

The strong performance of hedge funds in the crypto market could be due to the lack of competition in the market from equities, according to Jeff Dorman, chief investment officer at crypto investment management firm Arca. “TradFi hedge fund portfolios are very similar, and passive indices far outperform active management in today’s select market. Compare that to digital assets, and there really isn’t that much competition yet. “

Dorman says most Wall Street institutions focus entirely on bitcoin and ether, leaving opportunities among mid-cap tokens available for crypto funds.

“The ideal for active management is a set of growing and evolving investment opportunities without increasing competition, and that is where we are today,” he noted. “Due to regulatory issues, size constraints and lack of education, large TradFi funds have not significantly penetrated digital assets apart from buying a few private transactions and trading BTC and d ‘ETH. “

© 2021 The Block Crypto, Inc. All rights reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial or other advice.

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