Multi-strategy crypto funds: who’s running diversified books
Multi-strategy crypto funds: who’s running diversified books
Multi-strategy crypto funds run quant, directional, arbitrage, and venture strategies under one roof. They promise diversification without the double fee of a fund of funds. But when correlations spike, the diversification benefit can evaporate. The BH Digital experience in 2025 is the defining case study.
(since inception)
to Bitcoin
multi-strategy models
return in 2025
- ✓ Multi-strategy crypto funds run multiple investment approaches within a single fund vehicle. Unlike a fund of funds (which invests in other funds), multi-strat runs the strategies internally with its own portfolio managers and infrastructure.
- ✓ The category sits in the middle of every performance metric: ~1.60 Sharpe, ~0.45 beta, -25% to -45% max drawdown. It is the diversified option that avoids the extremes of both directional and market-neutral strategies.
- ✓ Approximately 34% of crypto hedge funds now employ multi-strategy models, making it the second most common approach after long-only. The category is growing as the industry matures and managers seek to diversify revenue streams.
- ✓ BH Digital (Brevan Howard’s crypto division) is the highest-profile multi-strat in the industry. It managed ~$2.4 billion at the start of 2025 and lost 29.5% for the year, its worst result since inception. The lesson: institutional pedigree and multi-strategy diversification do not guarantee protection against crypto market structure shifts.
- ✓ The key advantage of multi-strat over FoF: no double fee layer. The key advantage of multi-strat over single-strategy: built-in diversification and dynamic capital allocation between strategies. The key risk: if the central risk team or culture fails, all strategies are affected simultaneously.
What multi-strategy means in crypto
A multi-strategy crypto fund runs multiple distinct investment strategies within a single legal entity, managed by separate portfolio management teams but overseen by a central risk management function. A typical multi-strat might run four or five books simultaneously: a quantitative trading book, a discretionary long/short book, a market-neutral arbitrage book, a DeFi yield book, and perhaps a venture or early-stage investment book.
The idea is that these different strategies have different return drivers and different sensitivities to market conditions. When the quant book has a bad month, the arbitrage book might offset it. When directional strategies suffer during a correction, the market-neutral book provides ballast. The diversification across strategies is supposed to produce a smoother return stream with lower drawdowns than any individual strategy.
In traditional finance, multi-strategy hedge funds (Citadel, Millennium, Point72) are among the largest and most successful in the industry. They run dozens or hundreds of independent teams across equities, credit, macro, and quant, all sharing a common risk infrastructure. In crypto, the multi-strat model is newer and smaller, but growing quickly as the industry matures and larger firms seek to replicate the multi-manager model that has worked so well in traditional markets.
The performance data confirms the middle-of-the-road positioning. Multi-strategy crypto funds in the CFR database have an average since-inception Sharpe of approximately 1.60, a beta to Bitcoin of roughly 0.45, and typical max drawdowns of -25% to -45%. Every metric falls between the extremes of quant/market-neutral (better risk-adjusted) and long-only/directional (higher absolute returns but worse drawdowns). See our strategy comparison for the full data.
Multi-strat vs. fund of funds: what is the difference?
| Feature | Multi-strategy fund | Fund of funds |
|---|---|---|
| Manager structure | All strategies run internally by the fund’s own PMs | Invests in external funds managed by independent firms |
| Fee structure | Single fee layer (2/20 or similar) | Double fee layer (FoF fees + underlying fund fees) |
| Risk management | Centralized risk team oversees all books | Each underlying fund has its own risk management |
| Capital allocation | Can shift capital between strategies quickly | Reallocation requires redeeming from one fund and subscribing to another (slow) |
| Transparency | Full visibility into all positions (internal) | Limited visibility into underlying fund positions |
| Correlation risk | All strategies share the same firm culture and risk framework | Underlying funds are truly independent |
| Key person risk | Dependent on the firm’s central leadership | Diversified across independent management teams |
The fundamental trade-off: multi-strat eliminates the double fee problem (you pay one set of fees, not two layers) but introduces correlation risk (all strategies are run by the same firm, share the same culture, and may respond similarly during stress events). A FoF has higher fees but genuine organizational diversification across independent managers.
For a deeper analysis of the FoF model, see our fund of funds guide.
The multi-strat crypto landscape
Large platform multi-strats. The biggest names in crypto multi-strategy are the traditional finance firms that brought their multi-manager model into digital assets. Brevan Howard’s BH Digital is the most prominent, having launched in 2021 with backing from co-founder Alan Howard. BH Digital ran macro-style trading, relative-value strategies, volatility management, and venture investments, supported by over 1,000 Brevan Howard team members and offices across 8 time zones. At the start of 2025, the unit managed approximately $2.4 billion.
Galaxy Digital operates a multi-strategy platform spanning trading, asset management, and investment banking across digital assets. Pantera Capital runs multiple fund strategies (liquid token, early-stage venture, and institutional funds) under one umbrella, though its strategies are separated into different fund vehicles rather than a single commingled multi-strat.
Crypto-native multi-strats. A growing number of crypto-native firms are adopting the multi-strategy model. Annamite Capital, launched in January 2025 by former Citadel and UBS veterans, operates as a multi-manager digital asset hedge fund with multiple external investment teams. Its early performance showed strong results across USD, BTC, and ETH share classes. M-Squared, part of the Monterra umbrella, runs a multi-manager approach from Malta.
Hybrid VC-plus-liquid multi-strategys. Several major crypto firms combine venture capital and liquid trading strategies in what amounts to a multi-strategy approach across the liquidity spectrum. Multicoin Capital runs both venture funds and a liquid token hedge fund. Polychain Capital, Galaxy Digital, and others similarly blend private and public market strategies. The hybrid model gives investors exposure to both the upside of early-stage investing and the liquidity of active trading, but it also creates complexity in valuation, liquidity management, and performance attribution.
The BH Digital case study: what allocators should learn
The most instructive multi-strategy story in crypto is Brevan Howard’s BH Digital, which lost 29.5% in 2025, its worst year since inception in 2021. This came after strong gains in 2023 and 2024. The drawdown prompted leadership changes and a strategic reassessment.
Why this matters for allocators evaluating multi-strat crypto funds: BH Digital had every advantage. It had the institutional pedigree (Brevan Howard is one of the world’s most respected macro hedge funds). It had scale ($2.4 billion). It had talent (crypto-native researchers combined with traditional finance veterans). It had infrastructure (24/7 operations across 8 offices). And it still lost 30% in a year when it was supposed to provide institutional-quality risk management.
The HedgeCo analysis identified specific reasons the diversification failed. Correlations between strategies spiked during stress events. Liquidity thinned simultaneously across all venues. Cross-asset hedges that had cushioned downside in previous years stopped working. The fund also held private equity and venture-style investments alongside liquid trading, which made the overall portfolio less liquid and harder to de-risk quickly.
The lesson is not that multi-strategy does not work. It is that multi-strategy diversification within a single firm is not the same as true independence across managers. When the market fractured in late 2025, all of BH Digital’s strategies were exposed to the same market microstructure problems (liquidity withdrawal, correlation spikes, margin dynamics) at the same time. The diversification benefit that works in normal markets can evaporate in stress events.
The post-2025 multi-strat is evolving. According to HedgeCo’s analysis, the post-2025 crypto hedge fund will look meaningfully different. Pure long exposure is increasingly viewed as inefficient. Funds are being pushed toward relative-value, volatility, and cross-market strategies. Liquidity tiers are being formalized in advance. Risk is now modeled at the ecosystem level, not the trade level. For multi-strat managers, this means the balance between aggressive directional bets and defensive non-directional strategies is shifting toward the latter. Allocators should ask how a multi-strat fund has adjusted its strategy mix in response to the 2025 experience.
How to evaluate a multi-strat crypto fund
Understand the strategy mix. What percentage of capital is allocated to each strategy? How often does the allocation change? A multi-strat that runs 70% directional and 30% everything else is really a directional fund with some diversification at the margin. A genuine multi-strat allocates meaningfully to multiple strategies and rebalances actively. Ask for the historical strategy allocation over time.
Evaluate the risk management function. The centralized risk team is the linchpin of a multi-strat. Ask how it works. Does the risk team have authority to reduce positions across all books? What are the fund-level and book-level drawdown limits? How are correlations between strategies monitored? In the BH Digital case, the risk function was sophisticated but the strategies proved more correlated than expected. The quality of the correlation modeling is the most important technical question for any multi-strat evaluation.
Assess the PM team quality across books. A multi-strat is only as good as its individual PM teams. Ask about the experience and track record of each team. A strong quant book paired with a weak discretionary book will drag the overall result. Good multi-strats have institutional-quality talent across all books, not just the flagship strategy.
Ask about the venture/illiquid component. If the multi-strat includes venture or private equity investments (as BH Digital did), understand how these are valued, how they affect liquidity, and what percentage of the portfolio they represent. Illiquid positions cannot be sold during drawdowns, which means the liquid books bear the full brunt of any forced de-risking. A multi-strat with 30% in illiquid investments has a very different liquidity profile than one that is 100% liquid.
Compare against a DIY portfolio. Could you replicate the multi-strat’s exposure by investing in 2-3 individual specialist funds? If the answer is yes and the total fees would be similar, the question becomes: is the central risk management and dynamic capital allocation worth enough to justify choosing the multi-strat over a DIY approach? For some allocators, the answer is yes (operational simplicity, a single relationship to manage). For others, the DIY approach provides better transparency and genuine manager diversification.
For the complete evaluation framework, see our manager evaluation guide and due diligence checklist.
Compare multi-strat funds in the database
Filter by multi-strategy. Compare Sharpe ratios, drawdowns, beta, and 60+ risk metrics. See how multi-strat managers performed during 2022 and 2025 stress events.
Explore the Performance Database →FAQ
What is the difference between multi-strategy and fund of funds?
A multi-strategy fund runs multiple strategies internally with its own PMs and a centralized risk team. A fund of funds invests in external funds managed by independent firms. Multi-strat has one fee layer; FoF has two. Multi-strat has centralized risk control; FoF has distributed risk across independent managers. Each has advantages. We cover FoFs in detail in our fund of funds guide.
Is multi-strategy the safest crypto fund approach?
It is lower risk than single-strategy directional funds but not the safest option. Market-neutral and arbitrage strategies have lower drawdowns and higher Sharpe ratios. Multi-strategy provides moderate diversification but can still experience significant losses when correlations spike across strategies during stress events (as BH Digital demonstrated in 2025). See our strategy comparison for the full risk spectrum.
How large are crypto multi-strategy funds?
Multi-strat funds tend to be among the largest in crypto because the model requires significant infrastructure, multiple PM teams, and a central risk function. BH Digital managed approximately $2.4 billion at the start of 2025. Galaxy Digital’s platform manages several billion across its activities. Most crypto multi-strats manage $200M+ and some exceed $1 billion. Smaller firms (sub-$100M) rarely have the resources to run a genuine multi-strategy operation.
What should I look for in a multi-strat’s track record?
Look at the fund’s performance during stress events (2022, late 2025). Specifically, assess whether the strategies were genuinely uncorrelated during the drawdown or whether they all declined together. If all books lost money at the same time, the diversification benefit was illusory. Also look at how quickly the fund recovered and whether the strategy mix changed afterward. A fund that learned from a stress event and adjusted its approach is more attractive than one that continued running the same playbook.
Related research
Crypto fund of funds guide · Complete list of crypto hedge funds · Top quant crypto funds · Market-neutral crypto funds · Performance by strategy · Understanding drawdowns · Bear market performance