PwC predicts more fund administrators will enter the crypto space
16 May 2019 London
Image: Shutterstock
As the cryptocurrency market has matured, more fund administrators are becoming more open to servicing crypto assets and could begin working more with clients in the near future, according to a new report by PwC.
This has been aided partly by the development of the lending market, allowing these funds to take short positions and utilise market-neutral and a variety of other strategies.
Although PwC’s research on crypto hedge funds cited the challenges of accurately valuing a crypto fund as public information, the fund landscape remains scarce and existing data is often inaccurate.
The PwC report also found that crypto hedge funds had median returns of -46 percent during 2018.
Results also highlighted that funds tend to be domiciled in the same jurisdictions as traditional hedge funds, with the top three jurisdictions named as the Cayman Islands, the US and the British Virgin Islands.
It further discussed there is a lack of ‘traditional’ fund administrators in the crypto asset space as most funds use relatively small fund administrators for net asset value (NAV) calculations.
The report explained that because “an independently verified NAV is crucial information for the fund auditor as well as investors, we expect to see more developments in this area as these functions ‘institutionalise’ further”.
It added: “Today, there are only a limited number of fund administrators servicing the crypto space. But this looks set to change over the coming months as the industry matures and some of the more established players become more comfortable with crypto assets and decide to move into this space.”
“While the lack of traditional custody offerings for crypto funds has been widely discussed due to security concerns and the requirements of institutional investors, fund administration has seldom come under the spotlight.”
This has been aided partly by the development of the lending market, allowing these funds to take short positions and utilise market-neutral and a variety of other strategies.
Although PwC’s research on crypto hedge funds cited the challenges of accurately valuing a crypto fund as public information, the fund landscape remains scarce and existing data is often inaccurate.
The PwC report also found that crypto hedge funds had median returns of -46 percent during 2018.
Results also highlighted that funds tend to be domiciled in the same jurisdictions as traditional hedge funds, with the top three jurisdictions named as the Cayman Islands, the US and the British Virgin Islands.
It further discussed there is a lack of ‘traditional’ fund administrators in the crypto asset space as most funds use relatively small fund administrators for net asset value (NAV) calculations.
The report explained that because “an independently verified NAV is crucial information for the fund auditor as well as investors, we expect to see more developments in this area as these functions ‘institutionalise’ further”.
It added: “Today, there are only a limited number of fund administrators servicing the crypto space. But this looks set to change over the coming months as the industry matures and some of the more established players become more comfortable with crypto assets and decide to move into this space.”
“While the lack of traditional custody offerings for crypto funds has been widely discussed due to security concerns and the requirements of institutional investors, fund administration has seldom come under the spotlight.”
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