Crypto fund performance by strategy: quant vs. discretionary vs. long-only
Crypto fund performance by strategy: quant vs. discretionary vs. long-only
Not all crypto funds are the same. A quantitative arbitrage fund and a long-only token fund have almost nothing in common except the asset class. Here is how each major strategy has actually performed across bull markets, bear markets, and everything in between.
(since inception)
to Bitcoin
to Bitcoin
tracked by CFR
- ✓ Algorithmic/quant funds have the highest since-inception Sharpe ratio (2.51) and the lowest beta to Bitcoin (0.27), meaning they generate the most efficient risk-adjusted returns with the least directional crypto exposure
- ✓ Long-only and index-tracker funds have the highest beta to Bitcoin (0.76-0.93), meaning they essentially move with the market. You are paying management fees for beta, not alpha
- ✓ Discretionary long/short strategies fall in the middle on every metric: moderate returns, moderate drawdowns, moderate Sharpe. Manager selection matters enormously here because the dispersion between good and bad discretionary managers is wider than in any other category
- ✓ Market-neutral strategies deliver the most consistent returns across market environments but give up the most upside in bull markets. They are the right choice for allocators who prioritize capital preservation over return maximization
- ✓ The “best” strategy depends entirely on what you are trying to achieve. There is no universally superior approach. Match the strategy to your portfolio need, risk tolerance, and time horizon
The strategy scorecard
Before getting into the details of each strategy, here is the headline comparison table. This uses since-inception data from the CFR Performance Database, aggregated across all reporting funds in each category. The numbers speak for themselves.
| Strategy | Avg return (2025) | Sharpe (since inception) | Beta to BTC | Typical max DD | % of funds | Avg fee |
|---|---|---|---|---|---|---|
| Algorithmic/quant | ~48% | 2.51 | 0.27 | -15% to -35% | 28% | ~23% perf fee |
| Discretionary L/S | ~42% | ~1.30 | ~0.55 | -40% to -60% | ~20% | 2/20 typical |
| Market-neutral/arb | ~13% | ~2.10 | ~0.15 | -5% to -20% | ~17% | 1-2/20 |
| Long-only | ~21% | ~0.80 | 0.76 | -60% to -80% | ~19% | 2.4% mgmt fee |
| Index/tracker | Varies | ~0.70 | 0.93 | -65% to -80% | ~5% | Low |
| Multi-strategy | ~35% | ~1.60 | ~0.45 | -25% to -45% | ~11% | 2/20+ |
The standout: quant funds have a 2.51 Sharpe with only 0.27 beta to Bitcoin. That means they are generating strong risk-adjusted returns while being largely uncorrelated with Bitcoin’s direction. At the other end, index/tracker funds have 0.93 beta to Bitcoin, meaning they basically are Bitcoin (plus altcoins) with a management fee on top. Everything else falls in between.
Data source. The figures in this table come from the CFR Q4 2025 Crypto Fund Industry Report and the CFR Performance Database. Return and Sharpe data is calculated since inception (January 2017 through December 2025) across all reporting funds. Beta is calculated against Bitcoin monthly returns. Fee data is the average across each strategy category. For fund-level data, use the Performance Database.
Quantitative and systematic strategies
Quant funds have been the performance story of crypto for the last several years, and the data confirms it. With a since-inception Sharpe of 2.51, they have delivered more return per unit of risk than any other strategy category by a wide margin. The next closest is market-neutral at 2.10.
What quant funds do: they use algorithmic models to identify and exploit patterns in crypto market data. This includes statistical arbitrage (finding correlated assets that temporarily diverge), momentum strategies (buying assets that are going up and shorting those going down), mean-reversion strategies, and high-frequency market making. The models run continuously, react to data in milliseconds, and make thousands of decisions per day without human emotion getting in the way.
The low beta to Bitcoin (0.27) is crucial. It means quant fund returns are mostly independent of whether Bitcoin goes up or down. In 2022, when Bitcoin fell 64%, the best quant funds were flat or slightly positive. In 2025, when Bitcoin rose 120%+, quant funds averaged 48%. They participate in some of the upside while being largely insulated from the worst of the downside. That asymmetric return profile is what makes institutional allocators love them.
The trade-offs: quant funds charge the highest performance fees in the industry (23.38% average, according to our data). Capacity is limited because the strategies depend on market inefficiencies that shrink as more capital chases them. And the strategies are opaque. An allocator investing in a quant fund is essentially trusting a black box. If the model breaks or the market structure changes in a way the model does not anticipate, the results can deteriorate quickly with little warning.
For a deeper look at the quant fund landscape, see our article on top quantitative crypto hedge funds.
Discretionary long/short
Discretionary long/short is the strategy most people think of when they hear “crypto hedge fund.” A human portfolio manager makes investment decisions based on their analysis of the market: which tokens to buy, which to short, how much net exposure to carry, when to add risk, when to take it off. The decisions are judgment-based, not algorithmic.
Performance in this category has the widest dispersion of any strategy. The best discretionary managers generated 80-100%+ in 2025. The worst lost money. The average was around 42%, which is respectable, but the gap between the 90th and 10th percentile is massive. This means manager selection in discretionary long/short matters more than in any other category. Picking the right manager is worth 50-80 percentage points of return in a given year. Picking the wrong one can cost you everything.
The beta to Bitcoin (approximately 0.55) reflects that most discretionary managers carry net long exposure most of the time. They are directionally bullish on crypto more often than not, which means they capture a lot of the upside in bull markets but also participate in a lot of the downside in bear markets. The -40% to -60% typical max drawdown range confirms this: these funds took significant losses in 2022.
What distinguishes the best discretionary managers from the worst: conviction sizing (how much they put into their highest-conviction ideas), risk management discipline (how quickly they cut positions that are not working), and the ability to go meaningfully net short or flat when the market turns. Many discretionary managers say they can short but rarely do in practice, which means they are effectively long-biased and should be evaluated accordingly.
Long-only and index strategies
Long-only crypto funds hold a basket of tokens and ride the market up and down. They do not short anything and they do not hedge. The investment thesis is that crypto as an asset class will appreciate over time, and the fund adds value through token/asset selection (picking which tokens or cryptos to hold and in what proportion).
The data is clear: long-only strategies have the lowest Sharpe ratio (0.80) and the highest beta to Bitcoin (0.76) of any actively managed category. Index/tracker funds are even more extreme at 0.93 beta, essentially just tracking Bitcoin and the broader market.
In a bull market, this works. Long-only funds returned 21% in 2025, which sounds fine until you realize Bitcoin returned 120%+. The underperformance is because most long-only funds diversify beyond Bitcoin into altcoins, and many altcoins underperformed BTC in 2025. In a year when Bitcoin dominance rises, diversified long-only funds lag the benchmark.
In a bear market, this is painful. Long-only funds drew down 60-80% in 2022. The 2.40% average management fee, the highest of any strategy category, adds insult to injury. You are paying 2.4% per year for the privilege of losing 70% when the market crashes.
The honest question allocators should ask: what am I paying for? If the fund has 0.76 beta to Bitcoin and does not meaningfully outperform a passive BTC/ETH allocation, the management fee is not justified. You could get similar exposure through a spot Bitcoin ETF at a fraction of the cost. Long-only funds earn their fees only if their token selection consistently adds alpha over a simple market-cap-weighted crypto index. Most do not.
Compare strategies in the Performance Database
Filter 300+ funds by strategy type. Compare Sharpe ratios, drawdowns, beta, and 60+ metrics side by side. See how quant, discretionary, long-only, and market-neutral funds have actually performed.
Explore the Performance Database →Market-neutral and arbitrage
Market-neutral strategies aim to profit regardless of whether crypto goes up or down. They do this by exploiting structural inefficiencies: price differences across exchanges, the basis between spot and futures prices, funding rate arbitrage on perpetual swaps, and statistical relationships between correlated tokens.
The since-inception Sharpe of approximately 2.10 and a beta of roughly 0.15 tell the story. These funds are doing something genuinely different from the rest of the crypto market. Their returns come from sources that have nothing to do with the direction of Bitcoin. In 2022, while directional funds lost 40-60%, the best market-neutral funds were positive. In 2025, while directional funds rode the bull, market-neutral funds returned a modest 13%. The consistency is the point.
Pythagoras Investments is the most publicly visible example in this category, having won multiple Hedge Fund Journal awards for its arbitrage strategy. The firm produces Sharpe ratios above 2.0 with max drawdowns in the single digits. That is an extraordinary risk profile for crypto. The trade-off is that absolute returns are low by crypto standards. A 13% return in a year when Bitcoin more than doubled does not sound exciting. But for an institution with a 7-8% return target and a strict drawdown budget, it is an excellent fit.
The risk to market-neutral strategies is that the inefficiencies they exploit can disappear as markets mature and more capital chases the same opportunities. Funding rate spreads have compressed over time. Cross-exchange price differences are smaller than they were five years ago. The best arbitrage firms are constantly finding new sources of edge, but there is no guarantee that today’s alpha will persist.
Multi-strategy funds
Multi-strategy funds run multiple approaches within a single vehicle: some quant, some discretionary, some arbitrage, some yield. The idea is diversification across strategies, not just across assets. If the quant book has a bad month, the arbitrage book might offset it.
The numbers reflect this balanced approach. Multi-strategy funds sit in the middle of the table on almost every metric: 1.60 Sharpe, 0.45 beta, -25% to -45% max drawdowns. They are neither the best nor the worst at anything. They are the diversified option.
The advantage: smoother returns, less strategy-specific risk, and the ability to shift capital dynamically between strategies as market conditions change. In theory, the fund can be more aggressive in bull markets (more directional) and more defensive in bear markets (more arbitrage and hedging).
The risk: complexity. Multi-strategy funds require more infrastructure, more PMs, more risk systems, and more operational overhead. The fees tend to be higher (2/20 or more with pass-through expenses). And the quality of a multi-strategy fund depends entirely on how well the different strategy books are coordinated and risk-managed. A poorly managed multi-strat can blow up just as badly as a concentrated directional fund if the strategies are correlated in ways the risk team did not anticipate.
How strategies behave in bull vs. bear markets
The chart tells the story visually. Long-only strategies have the widest range: the best in bull markets, the worst in bear markets. Market-neutral strategies have the narrowest range: modest in both environments, but never devastating. Quant strategies sit in between, with a favorable asymmetry: they capture a good amount of the upside while limiting the downside.
For allocators thinking about portfolio construction: a blend of quant (for risk-efficient returns) and market-neutral (for capital preservation) gives you a more stable crypto allocation than any single directional strategy. If you want upside participation as well, add a smaller allocation to a well-managed discretionary long/short fund. That three-strategy blend is what the most sophisticated institutional allocators are doing in crypto today.
How to choose the right strategy for your portfolio
Start with your risk budget, not your return target. If your board or investment committee has told you the crypto allocation cannot lose more than 20% in a drawdown, that eliminates long-only and most discretionary long/short strategies. You are looking at quant or market-neutral. If you can tolerate 40-50% drawdowns in exchange for higher upside, the full range of strategies is available.
Understand what you are paying for. Long-only funds charging 2.4% management fees for beta exposure is expensive when spot Bitcoin ETFs exist at under 0.25%. Quant funds charging 23% performance fees for genuine alpha at 2.5 Sharpe is expensive but justifiable. Match the fee to the value being delivered. For more on fees across the industry, see our fee analysis.
Diversify across strategies, not just managers. Two long/short crypto funds with different PMs are correlated because they are both directional. One long/short fund and one market-neutral fund are much less correlated. Strategy diversification reduces your overall crypto allocation volatility more than manager diversification within a single strategy.
Use the Performance Database to compare. The CFR Performance Database lets you filter by strategy, sort by Sharpe ratio or max drawdown, and compare funds across any time period. This is the tool that makes strategy selection data-driven rather than anecdotal.
Strategy-level performance data
Sharpe ratios, beta, max drawdown, correlation, and 60+ metrics. Filter by quant, discretionary, long-only, or market-neutral. Compare across any time period.
Explore the Performance Database →FAQ
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