You Shouldn't Be Surprised

In 2007, before bitcoin was even a glimmer in Satoshi Nakamoto's eye, Warren Buffet famously bet a prominent fund of hedge fund manager $1 million that over the subsequent decade, an S&P 500 index fund would outperform any basket of hedge funds he could put together.

The CFR Crypto Fund Index tracks more than 40 crypto funds, mostly hedge funds, across a variety of strategies.

Several crypto funds returned more than 1,000 percent in 2017 - meaning by year-end a fund manager could have taken home more in fees than the fund had assets to start the year.

Still, most crypto funds have a 2 and 20 fee structure similar to traditional hedge funds and many have high water marks.

So while crypto fund performance fees have been staggering in absolute terms, the fee structure is no more of a hindrance to crypto funds than to traditional hedge funds.

Sure, these funds returned more in 2017 than traditional hedge funds have in the past 20 years.

Buffet's index fund didn't take the lead over hedge funds until year four of the ten-year bet.

While the largest in the industry, it's quite small compared to traditional hedge fund performance indices which can include thousands of funds.

With the majority of crypto funds in the index now employing outside auditors, custodians and fund administrators, the industry is becoming less haphazard.

The crypto fund industry is still very much in a maturation phase, but with proper due diligence, crypto funds may present institutions, particularly those unwilling or unable to directly custody cryptoassets, an appealing way to get exposure to the sector.