Hedge fund Brevan Howard to expand its digital assets

By Raffaele Redi

The hedge fund Brevan Howard is planning to expand its cryptocurrency and digital assets.

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The hedge fund Brevan Howard is planning to expand its cryptocurrency and digital assets coverage as interest in cryptos from global investment management firms is increasing, with the percentage of investment fund betting on cryptos estimated to be around 20%.

The company appointed Colleen Sullivan, CEO and co-founder of CMT Digital, to lead the firm’s private and venture investment activities in crypto.

“Colleen’s exceptional track record in making highly successful crypto venture investments will be of tremendous benefit to Brevan Howard clients and underscores the firm’s commitment to rapidly expanding its platform and offerings in cryptocurrencies and digital assets,” Brevan Howard CEO Aron Landy told Hedgeweek.com.

The creation of BH Digital was reportedly aimed to significantly expand the firm’s involvement in cryptocurrencies and digital assets.

As Hedgeweek.com reported, earlier this year, Brevan Howard began investing in digital assets for its clients via the launch of a liquid token, value-oriented fund. The Brevan Howard Master Fund also announced in May that it would allocate 1.5% (around $84m) to cryptocurrencies.

Hedge funds invest in cryptos to diversify portfolios

According to PPW, which in the first quarter of 2021 conducted a survey of 39 hedge funds that accounted for an estimated $180bn in Assets Under Management (AuM), around a fifth of survey hedge funds are currently investing in digital assets (21%). Of those hedge funds who invest in digital assets, the average percentage of their total hedge fund AuM invested is 3%.

As the Third Annual Global Crypto Hedge Fund Report 2021 stressed, the most common primary reason given by hedge fund managers – more than 60% of them managing assets of at least $1bn – for including digital assets in their portfolio is ‘general diversification’.

Only around one in 10 of the managers surveyed claimed to invest in cryptos for a good inflation hedge, while the remaining executives questioned (around 30%) said they were interested in the new digital ecosystem.

Larger funds await further crypto regulation

According to the survey, 86% of hedge funds who are currently investing in digital assets intend to deploy more capital into the asset class by the end of 2021 with the remainder (14%) planning to maintain the same level of capital.

On the other hand, around 80% of hedge fund managers who responded to the survey are not currently investing in digital assets. Of those who do not invest in digital assets, 58% of responses were from larger hedge funds.

According to the survey, around a quarter of hedge fund managers who do not yet invest in digital assets confirmed that they are in late-stage planning to invest (9%) or looking to invest (17%), while just under two-thirds are unlikely to invest in the next three years (57%).

A further 17% of hedge funds said that they are curious about digital assets but waiting for further maturity, with most of those respondents holding at least US$1 billion in AuM (75%).

Barriers to investment

Around two-thirds of respondents said that if the main barriers were to be removed, they would actively accelerate involvement/investment in digital assets.

The top three challenges cited by hedge fund managers who currently invest in digital assets were client reaction and reputational risk, regulatory uncertainty and, finally, current service provider availability and lack of infrastructure. Surprisingly, only 20% of those surveyed worried about volatility.

The research finally shows that there are between 150 and 200 active crypto hedge funds currently. Quantitative funds are the most common among crypto hedge funds, making up just over a third of all currently active crypto funds. These funds typically have the shortest lock-up periods for investors.

BH did not immediately respond to a request for comment.

Further reading: Hedge funds to increase cryptocurrency exposure to 7.2%

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