Performance Measurement of Crypto Funds

14 Pages Posted: 12 Apr 2023 Last revised: 13 Apr 2023

See all articles by Niclas Dombrowski

Niclas Dombrowski

University of Hamburg

Wolfgang Drobetz

University of Hamburg

Paul P. Momtaz

University of California, Los Angeles (UCLA) - Anderson School of Management; Technische Universität München (TUM) - TUM School of Management; University College London Center for Blockchain Technologies; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: March 28, 2023

Abstract

Crypto funds (CFs) are a growing intermediary in cryptocurrency markets. We evaluate CF performance using metrics based on alphas, value at risk, lower partial moments, and maximum drawdown. The performance of actively managed CFs is heterogenous: While the average fund in our sample does not outperform the overall cryptocurrency market, there seem to be some few funds with superior skills. Given the non-normal nature of fund returns, the choice of the performance measure affects the rank orders of funds. Compared to the Sharpe ratio, the most commonly applied metric in practice, performance measures based on alphas and maximum drawdown lead to diverging fund rankings. Depending on their ranking of preferences, CF investors should thus consider a bundle of metrics for fund selection and performance measurement.

Keywords: crypto funds, active investment management, performance measurement, fund selection, blockchain-based digital assets

JEL Classification: G11, G12, G23, G24

Suggested Citation

Dombrowski, Niclas and Drobetz, Wolfgang and Momtaz, Paul P., Performance Measurement of Crypto Funds (March 28, 2023). Economics Letters, Forthcoming, Available at SSRN: https://ssrn.com/abstract=4403360 or http://dx.doi.org/10.2139/ssrn.4403360

Niclas Dombrowski

University of Hamburg ( email )

Hamburg

Wolfgang Drobetz

University of Hamburg ( email )

Moorweidenstrasse 18
Hamburg, 20148
Germany

Paul P. Momtaz (Contact Author)

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Technische Universität München (TUM) - TUM School of Management ( email )

Arcisstr. 21
Munich, 80333
Germany

University College London Center for Blockchain Technologies ( email )

UCL CBT UCL Computer Science
Malet Place London WC
London, London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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