A growing majority of global hedge funds now have money in crypto assets, with 55% reporting some level of exposure in 2025, up from 47% a year earlier, according to the 7th Annual Global Crypto Hedge Fund Report released by the Alternative Investment Management Association (AIMA) and PwC.
The report, based on a survey of 122 hedge fund managers and institutional investors overseeing an estimated $982 billion in assets, concludes that digital assets are shifting from a niche holding to a regular part of hedge fund portfolios. Traditional hedge funds still tend to keep allocations small, often under 2% of assets under management, but most plan to increase exposure over the next 12 months as regulations and market infrastructure improve.
According to the report, managers are using a wider range of tools to gain exposure. Crypto derivatives are the most common instrument, used by 67% of traditional hedge funds with exposure, followed by spot trading, exchange-traded products and, increasingly, tokenised assets and related equities. Around 71% of those already invested plan to increase their allocations over the next year, citing diversification, market-neutral strategies and asymmetric return potential as key motivations.
Regulation in the United States is cited as a major driver of this shift. Recent moves such as the SEC’s “Project Crypto,” a new interpretive letter from the Office of the Comptroller of the Currency allowing banks to custody and settle digital assets, and the passage of the GENIUS Act establishing a formal framework for US dollar stablecoins have given many managers and investors more confidence to participate. Nearly half of institutional investors surveyed said the evolving US regulatory environment is encouraging them to increase their crypto allocations.
Crypto-focused hedge funds continue to expand in size and scope. Average assets under management in this segment have risen to $132 million from $79 million in 2024 and $41 million in 2023. Their portfolios remain concentrated in large-cap tokens such as bitcoin, ethereum and solana, but many are also generating yield through custodial and liquid staking, lending and other on-chain strategies.
The report found that 58% (slightly down from 63% in 2024) of crypto hedge funds are domiciled in the Cayman Islands, followed by the United States (13%) and the British Virgin Islands and Gibraltar (6%), demonstrating Cayman’s continued dominance as a preferred jurisdiction for digital asset managers. Family offices and high-net-worth investors remain the core backers, though allocations from funds of funds, pension plans and sovereign wealth funds are said to be growing.
The report also highlights a gradual move toward decentralised finance (DeFi) and tokenisation. About 43% of traditional hedge funds with crypto exposure plan to expand into DeFi over the next three years, and roughly one-third expect DeFi to significantly disrupt their operations. Separately, one-third of hedge funds are already exploring or pursuing fund tokenisation, with more than half expressing some interest in tokenised structures to broaden investor access and streamline operations. However, managers cite legal uncertainty, regulatory complexity and limited investor demand as the main barriers to wider adoption.
Infrastructure remains a sticking point. Centralised exchanges are still the dominant trading venue, chosen primarily for reputation, creditworthiness and liquidity, but many firms say they would increase their allocations if custody, legal, compliance and fund administration services improved. In the survey, 41% of institutional investors said they would raise their crypto exposure if market infrastructure further reduced operational and compliance risks.
“In recent years, our research has identified regulatory uncertainty as a major barrier to greater institutional adoption,” said James Delaney, managing director for asset management regulation at AIMA. “This year’s survey marks a turning point, with digital assets now moving from the margins toward the mainstream of hedge fund and institutional investing.”
Albertha Charles, global asset and wealth management leader at PwC UK, said the combination of regulatory engagement and macroeconomic uncertainty is pushing managers to take digital assets more seriously. “As hedge funds look to generate long-term returns, hedge against risk, and diversify their portfolio allocations during lingering macroeconomic volatility and uncertainty, the rise in digital asset exposure highlights the impact of regulatory engagement in the last year,” Charles said.
While nearly half of traditional hedge funds still have no crypto exposure and many cite mandates, tax concerns and reputational risk as reasons to stay out, the authors conclude that the direction of travel is clear: as rules are clarified and institutional-grade infrastructure matures, digital assets are likely to play a larger role in how hedge funds and other institutional investors build portfolios.
