PitchBook's latest fintech analyst note provides an overview of the various fund types and strategies employed by institutional investors in emerging crypto assets, which provide a differentiated liquidity and return profile compared to other early stage investments.
- Institutional investors are enjoying increasing access to crypto assets through hedge funds and similar vehicles; however, larger crypto funds are often limited to holding concentrated positions of bitcoin and ETH due to liquidity constraints.
- Recent research suggests that investors generally remain under-allocated to crypto assets on a risk-adjusted basis; from August 2010 to October 2017, bitcoin outperformed US large-cap equities 298% to 14. 5% on an annualized basis while producing a comparable Sharpe ratio.
- Passive vehicles offering exposure to crypto assets carry significantly higher fees than public market passive ETFs and mutual funds, as crypto managers leverage the lack of competition and outsized historical returns from cryptos to justify the higher fee load.