About 150 cryptocurrency hedge funds, which together manage over $1bn, were able to grow their assets under management threefold in 2018 despite the difficult market conditions last year.
A report by PwC and Elwood Asset Management based on the 100 largest crypto hedge funds shows that as the price of bitcoin slumped by 72% last year the median crypto hedge fund lost 46%.
Median assets under management grew from $1.2m in January 2018 to $4.3m in the first quarter of 2019.
The crypto hedge fund industry today is probably where the traditional hedge fund industry was in the early 90s"
The repor further highlighted that the average fund AuM was $21.9m as of Q1 2019 and 60% of funds have less than $10m in assets while only less than 10% are managing assets over $50m.
More than half of the analysed crypto funds (55%) are domiciled in Cayman, followed by the US (17%) and the BVI (13%). Most of the fund management companies are based in the US (64%), with Cayman in second place (20%), ahead of Singapore (5%).
According to the report, there are currently only around 150 active crypto hedge funds which manage approximately $1bn of assets, but this figure excludes index funds and venture capitalists. Several funds failed last year, the report said, leaving the industry highly fragmented.
Reflecting the relative youth of the sector, most crypto fund managers have comparatively little investment management experience of only three to four years on average. In addition, only 25% of crypto hedge funds' boards include independent directors.
"The crypto hedge fund industry today is probably where the traditional hedge fund industry was in the early 1990s," Henri Arslanian, who oversees cryptocurrencies at PwC, said in a statement.
The report noted regulators are increasing their oversight of the nascent cryptocurrency space.