The hedge-fund world didn’t come running to cryptocurrencies.
While some smaller funds embraced bitcoin and other digital currencies early on, the biggest names in the industry needed to warm up to the idea of investing in a completely new asset class.
But now that some of the world’s most respected investors have embraced bitcoin, the floodgates have opened. A new PwC report finds that while only 21% of hedge funds are currently investing in digital assets, a quarter of those who are not have made plans to this year.
The macro guys — managers like Brevan Howard, Tudor Capital, and more — were first of the big names to jump on the train more than a year ago, and the large multi-strategy funds have followed suit this year. Steve Cohen’s Point72, Izzy Englander’s Millennium, and Dmitry Balyasny’s eponymous fund have all either hired people to trade crypto, invested in digital currencies through a trust, or are exploring the area broadly.
There are still big names staying away from the space, such as Ken Griffin’s Citadel, which has not publicly been linked to any digital currency interest or efforts. In a CNBC interview in February, Griffin said he doesn’t understand the “economic underpinning of cryptocurrencies.”
“I understand how to value a stock — the net present value of earnings. I understand how to think about currency-exchange rates around the world. I don’t know how to think about what is effectively a digital token,” he said.
Here are what some of the biggest hedge fund managers are doing in the volatile space.
Point72 Asset Management
In May, billionaire Steve Cohen’s Point72 Asset Management told investors in a letter that it was “exploring opportunities around blockchain technology and its transformative and disruptive capabilities.”
“We would be remiss to ignore a now $2 trillion crypto currency market,” the firm said in a letter, according to Bloomberg.
The letter did not say if it would invest in the space through its private investing arm or through its hedge fund, telling investors “it’s too early to say what paths we will ultimately pursue and when.”
Balyasny Asset Management
Dmitry Balyasny’s eponymous firm is doing due diligence on portfolio managers who invest in cryptocurrencies, including bitcoin, but the firm’s hedge fund had not invested in the space as of April.
Billionaire Izzy Englander’s Millennium has exposure to the crypto markets through a variety of instruments, including ETFs and trusts, such as Grayscale Investments.
Grayscale, which has pulled in hundreds of millions from hedge funds, operates 14 different trusts that invest in individual currencies including bitcoin, ethereum, litecoin, and more. The firm’s hedge fund is invested in some of Grayscale products, Millennium confirmed.
Third Point Management
Dan Loeb, the billionaire founder of Third Point, hinted about his crypto exposure before it came out in regulatory filings.
When Coinbase’s media arm reported that Loeb is a client of Coinbase, Loeb tweeted that he was “outed as a #holdr.” His firm has also made an investment in eToro, a private trading exchange that allows crypto which will go public via a SPAC in a $10.4 billion deal. It’s unclear how much cryptocurrency Third Point holds.
Tudor Investment Corporation
Paul Tudor Jones has been a bull for bitcoin for more than a year now.
The billionaire founder of Tudor Investment Corp. has likened investing in bitcoin to getting in early on a hot tech company.
He said last year that he put 1 to 2% of his assets in bitcoin, and it was later revealed he used Coinbase and Bakkt as custodians.
“The best profit-maximizing strategy is to own the fastest horse. If I am forced to forecast, my bet is it will be bitcoin,” Jones said in the client note last year.
Alan Howard, the billionaire cofounder of Brevan Howard, had already been investing his personal wealth in digital currencies, and his massive macro hedge fund is now following suit.
Up to 1.5% of Brevan’s flagship fund will be invested in digital assets, according to Bloomberg, which reported in April that Johnny Steindorff and Tucker Waterman, co-founders of crypto investment firm Distributed Global, will oversee the initial allocation for the fund. Brevan is an investor in Distributed Global, as well as One River Asset Management, which runs crypto funds of its own.
Howard, similar to Avenue Capital founder Marc Lasry, invests some of his personal wealth into digital currencies.
For everyone worried about inflation, Ray Dalio is recommending bitcoin, not bonds, as a hedge.
The billionaire founder of Bridgewater Associates said in an interview with CoinDesk last week that he expects the US dollar to be devalued soon, pushing bitcoin higher. He revealed in this interview that he is personally invested in bitcoin, somewhat of a surprise as he was previously skeptical about the space.
At the start of this year though, Dalio started to change his tune, calling bitcoin “one hell of an invention” in a letter to investors. It’s unclear how much crypto Bridgewater holds.
While Tiger Global is not investing in crypto through its hedge fund, the firm’s private investing arm is still exposed to the space.
Billionaire Chase Coleman’s manager was a leader in Babel Finance’s $40 million Series A alongside venture firms like Sequoia and Dragonfly Capital. The firm, which has offices in Singapore, Beijing, and Hong Kong, has gone from offering loans to crypto miners and traders to a more full-scale crypto lending business targeting institutional clients. It also has a suite of asset management products focused on digital currencies.
Tiger Global also partnered with fellow Tiger Cub Coatue Management to lead Bitso’s $250 million Series C, as the Mexican company became the first crypto unicorn in Latin America with a $2.2 billion valuation.
Bitso operates a cryptocurrency platform in Mexico, Argentina, and Brazil.
Coatue’s investment into Bitso alongside Tiger Global came just five months after the Mexico City-based start-up raised its Series B.
The company has raised more than $300 million in total now, and Daniel Vogel, the cofounder and CEO of Bitso, said more than 2 million people use the platform, which only requires a minimum buy of 50 Mexican pesos, or roughly $2.50.
In 2017, Man Group CEO Luke Ellis told Reuters that his firm would add cryptocurrencies to its investment universe for the firm’s traders, but it seems Ellis isn’t sold on the long-term benefits pitched by bitcoin evangelists.
In a March interview with CNBC, Ellis said bitcoin is more of a trading instrument than a long-term asset allocation.