Multi-strategy crypto funds: who’s running diversified books
Multi-strategy crypto funds: who’s running diversified books
Multi-strategy funds promise diversification without the double fee of a fund of funds. But when correlations spike, the diversification benefit can evaporate. Here’s how the category actually performs, what to look for, and why manager selection matters more here than anywhere else.
Sharpe (SI)
beta to Bitcoin
in CFR database
gap in 2025
- ✓Multi-strategy crypto funds run multiple investment approaches (quant, directional, arbitrage, yield) within a single fund vehicle. Unlike a fund of funds, multi-strat runs the strategies internally with its own PMs and infrastructure.
- ✓The category sits in the middle of every performance metric: 1.22 median Sharpe, 0.44 median beta, -29.2% median max drawdown. It’s the diversified option that avoids the extremes of quant (higher Sharpe, lower beta) and long-only (higher returns but deeper drawdowns).
- ✓We track 82 multi-strategy funds in our database, representing 26% of all crypto hedge funds. It’s the second-largest category after quant (37%).
- ✓In 2025, multi-strategy averaged -2.4% with 50% of funds positive. The best fund returned +108%, the worst lost 47.9%. That 156-point gap was the widest dispersion of any category. Manager selection matters more here than anywhere else.
- ✓BH Digital (Brevan Howard’s crypto division) is the highest-profile multi-strat. It reportedly lost approximately 29.5% in 2025, according to the Financial Times. Institutional pedigree does not guarantee protection against crypto market structure shifts.
What multi-strategy means in crypto
A multi-strategy fund runs two or more distinct investment approaches under a single roof. The most common combination is quantitative trading (arbitrage, market making) plus directional positioning (long/short crypto tokens) plus yield strategies (staking, DeFi lending, funding rate capture). The portfolio manager allocates capital dynamically between strategies based on the opportunity set.
The appeal is straightforward: built-in diversification. When one strategy underperforms (say, trend following in a choppy market), another might compensate (say, arbitrage capturing volatility-driven spreads). In theory, the combination should produce a smoother return stream than any single strategy alone.
In practice, this works better in some market environments than others. When correlations across crypto assets spike (as they do in severe selloffs), the diversification benefit shrinks because everything moves together. During the Q4 2025 selloff, when Bitcoin dropped 23.3% and altcoins fell even more, many multi-strat funds found that their different strategies were all losing money simultaneously. That’s the limitation of diversification within a single, highly correlated asset class.
Multi-strategy vs. fund of funds
Both multi-strategy and fund of funds aim to give investors diversified crypto exposure. The mechanics are different, and so are the economics.
| Dimension | Multi-strategy | Fund of Funds |
|---|---|---|
| Structure | Single fund, multiple internal PMs/strategies | Fund that invests in other external funds |
| Median Sharpe (SI) | 1.22 | 1.37 |
| Median beta | 0.44 | 0.15 |
| Median max DD (SI) | -29.2% | -18.1% |
| 2025 avg return | -2.4% | -13.0% |
| Fee structure | Single layer: typically 2% + 20% | Double layer: 1% + 10% on top of underlying ~2/20 |
| Transparency | Full visibility into positions | Typically see underlying fund allocations only |
| Liquidity | Single fund liquidity terms | Constrained by underlying fund gates/lockups |
| # in CFR database | 82 | 29 |
The data reveals an interesting tradeoff. Fund of funds have a slightly higher median Sharpe (1.37 vs 1.22), much lower beta (0.15 vs 0.44), and shallower drawdowns (-18.1% vs -29.2%). On pure risk metrics, FoFs look better. But in 2025, FoFs lost -13.0% on average while multi-strategy lost only -2.4%. The double fee layer and the FoF’s inability to dynamically reallocate in real-time hurt during the year.
The fee difference is the deciding factor for most allocators. A FoF charging 1% + 10% on top of underlying 2/20 structures means roughly 40% of gross returns are consumed by fees in a good year. Multi-strategy’s single 2/20 layer means about 24% of gross returns go to fees. Over a full cycle, that difference compounds into a meaningful return gap. See our fund of funds guide for the full fee math.
Performance profile
Multi-strategy sits in the middle of the strategy leaderboard on almost every metric. That’s by design. It’s the balanced approach.
The median since-inception Sharpe of 1.22 is third-best behind quant (1.53) and FoF (1.37). It’s meaningfully above long-only (0.92) and index/tracker (0.55). A Sharpe above 1.0 means the strategy generates more return per unit of risk than the S&P 500, which is the baseline for institutional allocators.
The median beta of 0.44 tells you multi-strategy funds carry moderate directional exposure. They move with Bitcoin about 44% of the time. In a year when Bitcoin is up 50%, you’d expect the typical multi-strat to capture roughly 22% from beta alone, with the rest coming from alpha and other sub-strategies. In a year when Bitcoin is down 50%, you’d expect about -22% from beta plus whatever the hedged strategies contribute (ideally offsetting some of that loss).
The median max drawdown of -29.2% is the middle ground. Worse than quant (-20.7%) and FoF (-18.1%), better than long-only (-71.5%) and index (-78.7%). A 29% peak-to-trough decline is painful but recoverable. It requires a +41% gain to break even, which is achievable in a crypto recovery year.
The median annualized return since inception is 29.4%, the second-highest behind long-only (63.9%). But that long-only return comes with a -71.5% drawdown. Multi-strategy’s 29.4% comes with a -29.2% drawdown. The compounding math strongly favors the lower-drawdown strategy over a full cycle. For the full strategy comparison, see our strategy comparison.
Compare multi-strat managers
Filter the Performance Database by multi-strategy. Sort by Sharpe, beta, drawdown, or 2025 return. Compare managers side by side with 60+ metrics.
Explore the Performance Database → Free sampleHow multi-strat fared in 2025
Multi-strategy was the second-best performing category in 2025, behind quant. The average multi-strat fund returned -2.4%, which sounds bad in isolation but was meaningfully better than the CFR Index (-10.3%), fund of funds (-13.0%), long-only (-15.3%), and index/tracker (-24.4%). Only quant (+0.4%) did better.
Half of multi-strategy funds (12 of 24 reporting) posted positive returns for the year. That 50% positive rate was second only to quant’s 58%.
The dispersion within multi-strategy was enormous. The best multi-strat fund returned +108%. The worst lost 47.9%. That 156-point gap was the widest of any category and reflects the sheer diversity of approaches within the “multi-strategy” label. Two funds both called “multi-strategy” can have radically different allocations across sub-strategies, net exposures, and risk profiles.
The year’s Q2 rally (BTC +29.8%) and Q4 selloff (BTC -23.3%) tested both sides of the multi-strat book. Funds that actively reduced net exposure heading into Q4 fared well. Funds that stayed long through November’s -17.5% BTC decline gave back their year. The ability to dynamically reallocate across strategies is the whole promise of multi-strat. In 2025, the managers who actually did it separated from those who just talked about it.
The BH Digital case study
BH Digital is Brevan Howard’s dedicated digital assets division. It is arguably the highest-profile multi-strategy crypto fund in the world, backed by one of the most respected macro hedge fund firms. At the start of 2025, BH Digital reportedly managed approximately $2.4 billion, according to Hedgeweek.
According to the Financial Times and other reports, BH Digital lost approximately 29.5% in 2025, its worst result since inception. This is a significant data point because it demonstrates that institutional pedigree, massive resources, and a multi-strategy structure do not guarantee protection against adverse crypto market conditions.
A -29.5% year from a $2.4 billion institutional multi-strat is not a failure of process. It’s a data point about the limits of diversification within crypto. When the entire asset class sells off (as it did in Q4 2025), having multiple sub-strategies helps but does not eliminate directional risk. BH Digital’s result was roughly in line with the median multi-strategy max drawdown of -29.2% in our database. It was the expected worst-case experience for a multi-strat, not an anomaly. The lesson: calibrate your expectations to the strategy’s drawdown profile, not the manager’s name. Note: This figure is from public reporting (Financial Times, Hedgeweek). BH Digital does not report to the CFR database.
On the other end, Annamite Capital (launched January 2025 by ex-Citadel and UBS executives) reportedly returned +27.8% net in its first partial year, according to Hedgeweek. New managers with strong institutional backgrounds and fresh capital can outperform established players because they start without legacy positions and can deploy capital into the best current opportunities.
How to evaluate multi-strat managers
Given the 156-point dispersion within the category, evaluating individual managers is more important for multi-strategy than for any other strategy except perhaps discretionary long/short.
1. Sub-strategy allocation. Ask for the breakdown: what percentage of capital goes to quant, directional, yield, arbitrage, and other approaches? A multi-strat that is 80% directional long with a small arb sleeve is a very different product than one that is 40% quant, 30% directional, 30% yield. The allocation mix determines the risk profile more than any other factor.
2. Dynamic reallocation. How frequently does the manager shift capital between strategies? Some multi-strats rebalance monthly. Others shift weekly or even intraday. The speed and willingness to reallocate is the core value proposition: it’s what separates multi-strat from just holding a static basket of strategies. Ask for evidence of actual reallocation during specific market events (the Q4 2025 selloff is a good test case).
3. Correlation between sub-strategies. If the quant book and the directional book are both long crypto and highly correlated, you don’t have diversification. You have concentration with extra complexity. Ask the manager what the correlation between their sub-strategies is during stress periods. If everything goes down together in a selloff, the diversification benefit is illusory.
4. PM team depth. Multi-strat works best when each sub-strategy is run by a dedicated specialist. A single PM running quant, directional, and yield simultaneously is a generalist, not a multi-strat. Ask how many PMs run strategies, what their backgrounds are, and how capital allocation decisions are made across them.
5. The 2022 and 2025 drawdown. How much did the fund lose in 2022? How about Q4 2025? The median multi-strat max drawdown since inception is -29.2%. If a fund’s worst drawdown was -50%+, their diversification is not working in practice. If they launched after 2022, they have no severe bear market data, which means more uncertainty for you as an allocator.
For the complete evaluation framework, see our manager evaluation guide and due diligence checklist.
FAQ
What is a multi-strategy crypto fund?
A multi-strategy crypto fund runs two or more distinct investment approaches (quantitative, directional, arbitrage, yield, etc.) within a single fund vehicle. Capital is allocated dynamically between strategies based on market conditions. This differs from a fund of funds, which invests in separate external fund managers rather than running strategies internally. We track 82 multi-strategy funds in our database.
How did multi-strategy crypto funds perform in 2025?
Multi-strategy funds averaged -2.4% in 2025, the second-best of any category behind quant (+0.4%). 50% posted positive returns. The best fund returned +108%, the worst lost 47.9%. Bitcoin fell 6.3% over the same period, so multi-strategy as a group outperformed BTC by about 4 points. See the annual review for the full analysis.
Is multi-strategy better than fund of funds?
On fees, yes: multi-strat has a single fee layer (typically 2/20) while FoF has a double layer (1/10 on top of underlying 2/20). On risk metrics, it depends: FoFs have a higher median Sharpe (1.37 vs 1.22), lower beta (0.15 vs 0.44), and shallower drawdowns (-18.1% vs -29.2%). But in 2025, multi-strat returned -2.4% while FoF returned -13.0%. The fee drag matters most in down years. See our fund of funds guide for the detailed comparison.
What Sharpe ratio should I expect from a multi-strategy fund?
The median since-inception Sharpe for multi-strategy funds in our database is 1.22. Above 1.5 is very good for this category. Below 0.8 suggests insufficient return for the risk. Multi-strategy ranks third behind quant (1.53) and FoF (1.37) but above long-only (0.92) and index (0.55). See our Sharpe ratio analysis.
Where can I find and compare multi-strategy crypto funds?
The CFR Performance Database lets you filter by multi-strategy and sort by Sharpe, beta, drawdown, or any of 60+ metrics. The Fund List includes all 82 multi-strategy funds with strategy descriptions and contact details. A free sample is available.