Something, if acting as venture capital or walking like venture capital or talking like venture capital, then it is most possibly not a hedge fund. However, still, multiple crypto fund managers in the market who were launched in the last year have gone after a hedge fund structure. As a matter of fact, they should have gone for a venture capital model.
As per the regular practice, and considering its presence in the established market in stocks, hedge funds are analyzed based on their performance for a short period of time say a month or a quarter. It is possible to find out their price faster. The same is applicable to the crypto funds also, however, the only condition is that the investor has to invest in an asset which can be valued immediately. Otherwise, they better look for venture capitals only.
There is a proof that known and impactful crypto hedge funds are coming with venture funds. Some of these are freezing investors from taking out capital from the existing hedge funds; some funds are using side pockets. These are tools used to create long term liquidity investments. Funds invest in various ventures or buy stakes in companies, but, these assets investments can not priced/evaluated accurately.
This happens as a large part of these crypto projects do not get traded in the open market, and hence they get projected like a venture capital fund.
Venture capital funds are about making long-term investments. And they will perform poorly if anybody tries to cover them in a hedge fund structure ( which is meant to perform on a short-term basis). The hedge fund manager can invest in a crypto asset. However, the investment would not perform positively on a yearly basis.
A team of highly professional, qualified and experienced technologists runs an XYZ named company. The company witnessed a fall of 70 percent last year. The managers of the company lack professional money management education and experience. They launched the products without understanding the sentiments of the market, and they are facing the consequences.
On the other hand, let us consider another example where an XYZ Crypto company is run by vocal technologists who are keen on publishing their views without hesitating. So how does it work for XYZ? The company has lost half of its investors’ money in last year, and the company is saying their funds are similar to venture capital funds; however, they finally decide to go with hedge funds.
Well, let us wish luck to the managers of both the companies from the above.
A hedge fund model can work out for crypto in certain situations; some of the best performing crypto funds of the last year were featured as hedge funds. It will be safe to say that the hedge model can work well. Some funds ended the previous year 2018 with double-digit positive figures, while some most substantial funds had to suffer losses.