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A recent PwC report showed that global assets under management are going to surpass $145.4 trillion by 2025, currently at $84.9 trillion. Investments targeting alternative asset classes will more than double to 21.1 trillion. Investors will be looking to pursue opportunities in established asset classes such as real assets, private equity, private debt (trade finance, peer-to-peer lending in particular) and hedge funds and in more niche markets including machine learning/systematic strategies and cryptocurrencies. In this perspective, we focus on cryptocurrency and systematic trading strategies due to the prevailing “phrenitis” of investors allocating to the space or being in the process of exploring the markets. In an earlier perspective, we examined the effects of adding bitcoin and systematic CTAs to institutional portfolios and evidenced the enhancement of the risk/return profile as both strategies have uncorrelated alpha features, desirable for investors.
In Stone Mountain Capital, we have seen a recent trend: systematic CTA managers have started exploring the cryptocurrency markets with their trading algos. As volatility in their traditional asset classes is pretty much at all-time lows across the board, unregulated cryptocurrency markets constitute attractive sources of volatility for CTAs, required for the systematic production of return. The development of coin lending for shorting, spread trading, futures and options and the further regulation of crypto markets will be another source for letting CTAs and crypto strategies grow further together and should lead to further increases of institutional assets in the crypto markets.
This perspective is neither an offer to sell nor a solicitation of an offer to buy an interest in any investment or advisory service by Stone Mountain Capital LTD. For queries please contact Alexandros Kyparissis under email: firstname.lastname@example.org and Tel.: +447843144007. For further information around our research and advisory services please contact Oliver Fochler under Tel.: +447922436360 and email: email@example.com.
The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, Stone Mountain Capital LTD. Readers should refer to the Disclaimer.