Professor Coin: Performing managed crypto funds better than the market?

Professor Andrew Urquhart is professor of finance and financial technology and head of the Finance department at Birmingham Business School (BBS).

This is the fourth episode of the Professor Coin column, in which I bring important insights from published academic literature on cryptocurrencies to the Decrypt Readers. In this article we will investigate crypto funds.

Cryptocurrencies have become financial in recent years. Initially, investors who wanted to buy the coins of cryptocurrencies had to buy the coins themselves, learn how blockchain works and how they can take care of their own keys, while also dealing with self-herb of their crypto-assets.

At the same time, the only way to get exposure was to maintain the cryptocurrencies themselves – and only to be able to go for a long time Bitcoin was the reason for the price bubble of 2017, according to the Nobel Prize winner Robert Shiller.

From 2017, however, cryptocurrency products were introduced in the broader financial community. From the introduction of Bitcoin -Futures contracts to the CME and CBOE in December 2017, to the Futures ETF in October 2021, and the Spot ETF list in January 2024, getting exposure to the cryptocurrency market is never that easy been.

Nowadays, investors can be given exposure to the market by investing in cryptofonds, who keep portfolios that consist of liquid, digital tokens that are professionally managed by investing teams that generally bring together financing and technology experts. Data from Crypto Fund Research shows that the average management of assets (AUM) of these funds is more than $ 150 million, with reimbursements comparable to those of hedge funds (management costs of around 2% and performance costs just over 22%).

These funds only invest in cryptocurrencies and aim to time the market on behalf of their customers to surpass the market. But how successful have they been and what signals do they offer for the market?

The first study to investigate the performance of crypto funds was Bianchi and Babiak (2022), which show that the funds generally generate a higher return and alphas (surplus return over a benchmark) compared to passive benchmarks and conventional risk factors. They also show that these performance cannot be explained by ‘happiness’ of the fund managers, which suggests that these funds perform better than the cryptocurrency market.

A follow-up study by Dombrowski et al (2023) shows that only a few crypto funds have superior skills and, given the non-normal (crooked) nature of fund returns, the choice of performance is the ranking of funds, therefore we must be careful with Assessing their performance.

A recent study by Conlon et al (2025) shows that funds produce remarkably surplus returns, while the best performing funds continue to perform well in the future, and that this outperformance is due to the market timing capacity of managers.

But are there certain characteristics of cryptop funds, which previously surpasses the market? A recent study by Urquhart and Wang (2023) showed that crypto funds with managers with previous hedge fund experience achieve considerable efficiency, while managers with a crypto/blockchain background do not perform better. These results indicate that experience in managing funds, regardless of industry, is an important determining factor in the performance of cryptofonds.

That is why the academic literature suggests that investing in cryptomonds is worthwhile, because these funds can surpass the market and certain managers with certain characteristics can yield above the average return. With the introduction of Bitcoin and Ethereum -Spot ETFs in 2024, however, other spot ETF approvals may be possible on the horizon, as well as the Trump administration that enters the White House, or this managed the market for the market.

For more information, see:

Bianchi, D., Babiak, M. (2022). About the performance of cryptocurrency funds. Journal of Banking and Finance138, 106467.

Conlon, T., De Mingo-López, DV, Urquhart, A. (2025). Persistence and market timing capacity of cryptocurrency funds. Working paper.

Dombrowski, N., Drpringz, W., Momtaz, P. (2023). Performance mate for cryptop funds. Economic letters228, 111118.

Shiller, RJ (2017). What is Bitcoin really worth? Don’t even ask. The New York Times.

Urquhart, A., Wang, P. (2023). No cryptocurrency experience required: management characteristics in the performance of the cryptocurrency fund. Overview of company financing: Vol. 3: No. 4, pp 529-569.