The strong recovery of digital currencies in April helped end a two-month losing streak for cryptocurrency-focused hedge funds, data provider Hedge Fund Research (HFR) said in its monthly report. The HFR Blockchain Index, the benchmark used to measure the monthly performance of crypto funds, registered a 47.1% leap last month after declining 34% in March. The revival helped narrow year-to-date (YTD) losses to 19.3%.
The HFR Cryptocurrency Index posted slightly stronger returns of 48.52% and reduced the YTD decline to 17.48%.
HFR president Kenneth Heinz commented:
"Hedge funds extended gains in April to begin the second quarter and also extended the YTD outperformance of most equity market indices, with support and contribution from Energy and Volatility exposures.”
Across the industry, hedge funds were buoyed by the rebound in cryptocurrency markets, with the HFRI Fund Weighted Composite Index gaining 0.38% and bringing its YTD performance to 0.39% in contrast to the YTD declines of equity market benchmarks S&P 500, DJIA, DAX, FTSE, and MSCI World indices.
"The industry continues the process of evolving transitional politics and economics creating long and short opportunities across a wide continuum of specialized exposures and industries, including fixed income/interest rate-sensitive equities, retail, M&A, technology, and blockchain. This powerful process is likely to continue to drive performance through mid-2018."
Study: Crypto assets to double this year
The solid gains of crypto-focused funds in April mirrors the findings of an earlier study by Crypto Fund Research, which predicted the total volume of virtual currency fund assets could rise two-fold this year given the number of fund launches so far this year.
The study said:
"Crypto hedge funds are the fastest growing segment of the hedge fund industry. Also, several of the top performing hedge funds in 2017 were cryptocurrency funds. Hedge funds are the most common type of digital asset fund, but venture capital crypto funds are launching quickly, and existing tech/FinTech VC firms are expanding investments into blockchain startups and launching their blockchain funds. As some blockchain companies mature, private equity funds are beginning to get involved.”
Last week, PayPal co-founder Peter Thiel was reported to be backing a venture capital startup that aims to entice large investors to allocate into cryptocurrencies. Thiel’s Founders Fund has invested an undisclosed amount in Tagomi, a budding enterprise looking to address challenges in cryptocurrency trading.