One-Third Of Hedge Fund Managers To Invest In Crypto, EY Reveals

Nearly one in three hedge fund managers plans to invest in cryptocurrencies as the traditional finance space is increasingly fusing with cutting-edge financial technology.

What Happened: A recent study conducted by "big four" auditing firm Ernst & Young revealed that 31% of hedge fund managers — 24% of alternative investors and 13% of private equity managers — plan to add cryptocurrencies to their portfolios within the next two years, according to a Monday Decrypt report. The study polled 264 alternative institutional investors that jointly manage nearly $5 trillion.

Alternative investment hedge funds are pouring their capital into anything that’s not a stock, bond or cash — that includes precious metals, art and real estate but also potentially rare playing or basketball cards.

Still, only 7% of those funds already have crypto or related assets in their portfolio. Among those funds that were exposed to digital assets, holding cryptocurrencies directly, derivatives (futures or options) and providing funding to private blockchain companies were the most popular ways to gain exposure to the industry.

Of the responding managers, 78% said that their fund did not invest in crypto because it does not fit its strategy. Other major reasons why they refrained from investing in the space include volatility, regulatory uncertainty and lack of understanding of the asset class.