Crypto Fund Research’s Quarterly Crypto Fund Report provides a quarter-end overview of the industry and a detailed look at industry trends over time. We hope that the quantitative data and relevant insights provided by these reports will play a positive role in increasing the transparency of the crypto fund industry and provide useful metrics for crypto funds and other players to measure their growth, operations and best practices.
To cover the broadest possible scope, this report covers crypto hedge funds, venture capital funds, hybrid funds, private equity funds, funds of funds and passive funds. Unless otherwise stated, the term “crypto fund” encompasses these broad fund types.
As of the end of the first quarter of 2022, there were more than 850 cryptocurrency funds in the world, mainly in more than 80 countries. The pace of new fund launches began to pick up in the first quarter of 2021, a trend that will continue through the rest of 2021 and into 2022. However, in a situation not seen in nearly two years, the number of closed funds exceeded the number of new funds in the first quarter .
Crypto funds lost 3.4% in the first quarter, slightly less than Bitcoin’s -1.7% return.
- After deducting fees, crypto funds slightly underperformed bitcoin in the first quarter.
- Former a16z partner Katie Haun has raised $1.5 billion for her two new crypto funds.
- Sequoia Capital has announced the launch of its $600 million crypto fund.
- Bain Capital launches $560M crypto fund focused on Web3 and DeFi.
Crypto Fund Industry Overview
For the first time since Q2 2020, the number of crypto fund closures exceeded the number of new funds.
More than half of crypto funds are located in North America, with the majority in the United States. Europe and Asia each own about 20% of the fund.
However, it is important to note that crypto funds tend to employ more “distributed” offices than traditional funds.
A 2021 survey of crypto funds by Crypto Fund Research found that, instead of maintaining one or more physical offices, 27% of funds do not rely on physical offices to allow employees to work from home or elsewhere globally.
While most crypto funds have a main office in the U.S., less than 20% are registered there (for example, registering companies in Delaware). For various tax, legal and regulatory reasons, the Cayman Islands and the British Virgin Islands are the primary offshore legal residences for crypto funds. Together, the aforementioned offshore islands make up 49% of crypto funds’ domiciles. This is relatively consistent with research on traditional hedge funds, where about one-third of hedge funds are domiciled on offshore islands and only 20 percent are in the United States.
Most crypto funds can be broadly classified as venture funds, followed closely by crypto hedge funds.
In the first quarter of 2022, the assets under management (AUM) of crypto funds were basically unchanged. Investor additions were very modest, offsetting small performance declines for many funds.
Net inflows to crypto funds are an important indicator of investor sentiment. They are net purchases and redemptions by new investors, independent of changes in the performance of the fund’s underlying assets.
Crypto funds saw net inflows of around $200 million in the first quarter. Investor inflows into crypto hedge funds were positive in January and February .
While crypto funds continue to grow in size, assets remain highly concentrated in the hands of dozens of funds. However, the recent trend is towards larger and larger crypto funds. This was mainly due to its strong performance and the attrition of some smaller funds. In addition, several new funds with more than $100 million in committed capital launched during the quarter.
Crypto Fund Research estimates that at the end of the first quarter of 2021, crypto funds collectively managed about $69.2 billion in assets. This includes crypto hedge funds, venture funds and index funds, down slightly from the end of 2021.
While most crypto funds are still relatively small, the proportion of funds under $10 million continues to shrink as funds continue to attract new capital and grow their size under management through good fund performance. 37%
[原文如此——译者注]of crypto funds have less than $10 million in assets under management. The proportion of funds with more than $100 million under management continued to grow.
Because of the differences in size and year between crypto funds, the medians of some key operating metrics are more meaningful, as follows:
The minimum investment in a crypto fund varies by fund type. Crypto hedge funds and funds of funds typically have higher minimum investment amounts, while token funds have lower or no minimum investment amounts.
A 2% management fee and a 20% incentive/performance split (2/20) is the most common fee structure for crypto funds. However, expense ratios tend to be lower on average across all funds and vary slightly between fund types. Indices and other passive strategies typically do not charge performance commissions, while funds with more active investing strategies tend to have higher performance commissions (and sometimes lower management fees).
Crypto Fund Performance Data and Metrics
The CFR Crypto Fund Index, which measures the average return (net of fees) of about 150 actively managed crypto funds, returned -3.4% in the first quarter of 2022.
For the latest on the CFR Crypto Fund Index, please visit: https://cryptofundresearch.com/cfr-crypto-fund-index/
From its inception in January 2017 to the end of the first quarter of 2022, the CFR Crypto Fund Index has returned 7,286%. Bitcoin rose 4,453% over the same period. Much of the index’s outperformance has occurred in bear market conditions like the second quarter of 2021. However, Bitcoin did outperform crypto funds in the first quarter.
Crypto funds fell 3.4% in the first quarter of 2022. With the exception of venture capital funds, all fund strategies were in the red during the quarter. The multi-strategy fund was the best performing strategy in the fourth quarter.
Beta is used in traditional finance to measure market risk, and by using Bitcoin as a proxy for market returns, allows us to determine how much of a particular fund strategy’s return is likely to be contributed by the market’s exposure to Bitcoin alone. Funds of funds tend to have the highest betas, while venture capital funds tend to have the lowest betas.
The “skew” (skew) reflects the shape of the return distribution and can determine how much the return differs from the normal distribution. Most crypto fund strategies show positive skew, or a longer smooth tail on the right. Importantly, the accuracy of the skewness calculation depends on a large amount of return data, which is not necessarily available for most crypto funds.
Like skewness, kurtosis is a measure of returns relative to a normal distribution. Kurtosis measures the magnitude of extreme returns, and positive kurtosis captures the magnitude of these extreme returns compared to the normal distribution of returns. A normal distribution has a kurtosis of 3.
The Sharpe Ratio is a performance metric often used by investors to help them better understand the relationship between investment risk and return. When comparing similar investments, a higher Sharpe ratio may indicate a higher rate of return relative to the risk taken. The Sharpe ratio can use either arithmetic or geometric returns. We use geometric returns in the calculations below.
Like the Sharpe ratio, the Sortino Ratio helps investors understand the relationship between investment risk and return. However, the Sortino ratio only focuses on risk (standard deviation) or negative return. By using only negative returns, the Sortino ratio can help investors identify adverse/downside risks while ignoring favorable/upside risks.
CFR Top Performing Funds in Q1 2022
Crypto Fund Research tracks the performance of more than 200 crypto funds, primarily crypto hedge funds, funds of funds and hybrid funds. At the end of each quarter and year, we publish the results of the top-performing funds (net of fees) for each period.
Here are Crypto Fund Research’s top performing funds for the first quarter of 2022:
To learn about other winners, visit: https://cryptofundresearch.com/crypto-fund-performance-awards/
Crypto Fund Survey
A recent survey of more than 60 crypto funds was conducted to assess investor sentiment and provide further insight into the crypto industry. The survey, covering crypto VC funds, hedge funds, hybrid funds, index funds and funds of funds, was conducted between July 12 and August 23, 2021. The full survey results are [here](https://cryptofundresearch.com/2021-crypto-fund-survey/):
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