Global Crypto Fund Q1 2022 Report

Introduction

Purpose

Crypto Fund Research's crypto fund quarterly reports provide an overview of the industry at the end of the quarter, as well as a detailed understanding of industry trends over time. We hope that the quantitative data and relevant insights provided by these reports will play a positive role in increasing transparency in the crypto fund industry and provide crypto funds and other participants with useful metrics to measure their growth, operations, and best practices.

In order to cover the broadest possible scope, this report covers crypto hedge funds, venture capital funds, hybrid funds, private equity funds, fund of funds, and passive funds. Unless otherwise specified, the term "crypto fund" encompasses these broad fund types.

Market Overview

As of the end of the first quarter of 2022, there were more than 850 cryptocurrency funds worldwide, mainly distributed in more than 80 countries. The pace of new fund launches began to accelerate in the first quarter of 2021, and this trend continued throughout the rest of 2021 and into 2022. However, as has not been seen in the past two years, the number of closed funds in the first quarter exceeded the number of new funds .

Crypto funds lost 3.4% in the first quarter, slightly lower than Bitcoin ’s -1.7% return.

news

The bad news

• After fees, crypto funds slightly underperformed bitcoin in the first quarter.

The good news

• Former a16z partner Katie Haun raised $1.5 billion for her two new crypto funds.

• Sequoia Capital announced the launch of its $600 million crypto fund.

• Bain Capital launches $560 million crypto fund focused on Web3 and DeFi .

Crypto Fund Industry Overview

For the first time since the second quarter of 2020, the number of crypto fund closures exceeded the number of new funds.

More than half of crypto funds are based in North America, with the majority in the U.S. Europe and Asia each have about 20% of funds.

However, it is important to note that crypto funds tend to use more “distributed” offices than traditional funds.

A 2021 survey of crypto funds by Crypto Fund Research found that rather than maintaining one or more physical offices, 27% of funds were not dependent on physical offices, with employees working from home or elsewhere around the world.

While most crypto funds have a primary office in the United States, less than 20% are registered there (e.g., incorporating in Delaware). The Cayman Islands and the British Virgin Islands are the primary offshore legal domiciles for crypto funds for a variety of tax, legal, and regulatory reasons. Together, the above offshore islands make up 49% of crypto funds’ domicile. This is relatively consistent with research on traditional hedge funds, where approximately one-third of hedge funds are domiciled in offshore islands and only 20% are domiciled in the United States.

Most crypto funds can be broadly categorized as venture funds, followed closely by crypto hedge funds.

Crypto fund assets under management (AUM) remained largely unchanged in the first quarter of 2022. Investor additions were very modest, offsetting small performance declines for many funds.

Crypto fund net inflows are an important indicator of investor sentiment. They are the net value of new investor subscriptions and redemptions, independent of changes in the performance of the fund's underlying assets.

Crypto funds saw net inflows of about $200 million in the first quarter. In January and February [原文如此——译者注] investor inflows into crypto hedge funds were positive.

Despite the continued growth in crypto fund assets under management, assets are still highly concentrated in the hands of dozens of funds. However, the recent trend is that crypto funds are getting bigger and bigger. This is mainly due to their strong performance and the reduction of some smaller funds. In addition, several new funds with committed capital of more than $100 million were launched this quarter.

692.4 亿美元

Crypto Fund Research estimates that crypto funds managed a total of approximately $69.2 billion in assets at the end of the first quarter of 2021. This includes crypto hedge funds, venture funds, and index funds, and is a slight decrease from the end of 2021.

35.8%

While most crypto funds are still relatively small, the percentage of funds with less than $10 million under management continues to shrink as funds continue to attract new capital and grow their assets under management through good fund performance. 37% [原文如此——译者注] of crypto funds have less than $10 million under management. The percentage of funds with more than $100 million under management continues to grow.

Due to the differences in size and vintage between crypto funds, it is more meaningful to examine the median of some key operating metrics, as shown below:

The minimum investment amount for crypto funds varies by fund type. Crypto hedge funds and fund 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 share (2/20) is the most common fee structure for crypto funds. However, the average of all funds tends to be lower and varies slightly between fund types. Index and other passive strategies typically do not charge performance fees, while funds with more active investment strategies tend to have higher performance fees (and sometimes lower management fees).

Crypto Fund Performance Data and Indicators

The CFR Crypto Fund Index, which measures the average return (net of fees) of approximately 150 actively managed crypto funds, returned -3.4% in the first quarter of 2022.

For the latest updates 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 returned 7,286%. Bitcoin rose 4,453% during the same period. Most of the index's outperformance 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. All fund strategies, except venture capital funds, lost money this quarter. Multi-strategy funds were the best performing strategy in the fourth quarter.

Beta is used in traditional finance to measure the risk of a market, and by using Bitcoin as a proxy for market returns, it allows us to determine how much of a particular fund strategy's returns may be due solely to the market's exposure to Bitcoin. Funds of funds tend to have the highest Beta coefficients, while venture capital funds tend to have the lowest Beta values.

Skew reflects the shape of the return distribution and determines how much the returns differ from a normal distribution. Most crypto fund strategies show positive skew, or a long smooth tail on the right. Importantly, the accuracy of skew calculations 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 a 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 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 focuses only on risk (standard deviation) or negative returns. By using only negative returns, the Sortino Ratio helps investors identify adverse/downside risk while ignoring favorable/upside risk.

CFR Best Performing Funds in the First Quarter of 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 our selection of the best performing funds (net of fees) during that period.

Here are the top performing funds from Crypto Fund Research in the first quarter of 2022:

To view other winners, please visit: https://cryptofundresearch.com/crypto-fund-performance-awards/

Crypto Fund Survey

A survey of over 60 crypto funds was recently conducted to gauge investor sentiment and provide further insights into the crypto industry. The survey, which covered crypto VC funds, hedge funds, hybrid funds, index funds, and fund of funds, was conducted between July 12 and August 23, 2021. The full survey results are available here:

[https://cryptofundresearch.com/2021-crypto-fund- survey/](https://cryptofundresearch.com/2021-crypto-fund- survey/)

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https://cryptofundresearch.com/q1-2022-crypto-fund-report/