The Professional Auditors Preferred by Crypto Funds

3 min read

Sep 7, 2023 12:13:45 AM

Investors in crypto funds prefer when managers perform audits on the monthly returns and NAVs. From our experience, many crypto funds thus choose to retain auditors, even if they are not always legally obliged to have an audit company oversee their books. In this article, we explore what sets the most common auditors apart.

Authors: Jan Spörer, Maximilian Bruckner

Photo: Sora Shimazaki

Table of Contents

Introduction
Grant Thornton: The Largest Auditor With an Internationally Dispersed Client Base
RSM: The No. 1 Crypto Fund Auditor in the Cayman Islands
KPMG: The Second Largest Truly International Player
Cohen & Co.: The Most Dispersed Offshore Specialist
Baker Tilly: Another Cayman Expert
Conclusion & Outlook

Introduction

We have previously covered the top crypto fund lawyers [1] and the top crypto fund administrators [2]. Today, we present another piece of the regulatory puzzle: professional auditing companies. In the last part of this mini-series, we will cover crypto funds’ banking partners.

But before that, we present the list of the most trusted crypto auditors.

Screenshot from 2023-09-06 23-31-04-1

Figure 1: The most commonly used professional crypto fund auditors amongst crypto hedge funds, by number of funds represented

Grant Thornton: The Largest Auditor With an Internationally Dispersed Client Base

Our database shows that Grant Thornton is present in the US, Canada, Switzerland, Liechtenstein, and the Netherlands.

With 15.3%, the market leader does not have a dominating position, but it is more than 1.5x as large as the next largest competitor, RMS. This is partly due to Grant Thornton’s relatively broad client base across the globe. Only KPMG has a similar geographical coverage.

Please note that Grant Thornton appears with different naming variants in different countries.

RSM: The No. 1 Crypto Fund Auditor in the Cayman Islands

RSM is home in the Cayman Islands. The practice has minimal coverage in Gibraltar and the British Virgin Islands as well.

With its specialized approach, RSM was able to achieve the second place in the overall ranking by almost exclusively catering to the Cayman crypto fund market.

With its focus on the Cayman Islands, it is the biggest significant player in the Cayman Islands.

KPMG: The Second Largest Truly International Player

KPMG’s crypto fund auditing business is pread across the globe with funds from the US, Singapore, Cayman, Germany, Liechtenstein, and Canada.

The auditing giant was thus able to obtain a relevant position in the crypto asset management space. However, for a Big 4 Auditor such as KPMG, the market share here is less than one would expect.

Cohen & Co.: The Most Dispersed Offshore Specialist

While RSM and Baker Tilly are heavily focused on the Cayman Islands, Cohen also has a significant footprint in the British Virgin Islands, and minor exposure in the US and in Singapore.

Baker Tilly: Another Cayman Expert

We close the top 5 list with Baker Tilly, who are almost exclusively in the Cayman Islands, with a minor client base in the British Virgin Islands and in Switzerland.

Conclusion & Outlook

The top 5 crypto audit companies have less than 50% of the overall fund audit market share. Given that the domiciles of crypto funds are also still relatively unconcentrated (we analyzed crypto fund domiciles in an article earlier this year [3]), we think that there is only limited room for additional market consolidation.

Should the most popular domiciles, most notably the US, Cayman Islands, and British Virgin Islands, be able to attract even more crypto funds, this could lead to concentration among crypto auditors as well.

Disclaimer: The information provided in this article is for informational purposes only and should not be construed as investment advice, endorsement, or recommendation. Consult with a qualified financial professional before making any investment decisions. Neither the authors nor 21e6 Capital shall be liable for any loss or damage arising from reliance on the information contained herein.