Venture capital investments in the cryptocurrency and blockchain sectors experienced a notable contraction during the second quarter of 2025. According to an analysis by Galaxy, total funding amounted to $1.976 billion spread across 378 deals, indicating a substantial 59% reduction in capital raised and a 15% decrease in the number of deals compared to the first quarter. This significant quarterly decline is partly attributable to the absence of unusually large, single transactions, such as the $2 billion investment into Binance from MGX in Q1, which had previously inflated investment figures. Without such outliers, the actual quarter-over-quarter decrease would have been closer to 29%.

Despite the overall slowdown, a shift in investment focus became apparent, with later-stage companies capturing more than half of the capital raised—a rare occurrence since 2021. Mining firms emerged as a dominant investment category, securing over $500 million, largely driven by a $300 million funding round for cloud-mining operator XY Miners. This surge in mining investments underscores the increasing demand for computational power, particularly with the expanding applications of artificial intelligence. Geographically, the United States maintained its position as the leading market, attracting nearly 48% of the invested capital and 41% of all deals, followed by the United Kingdom, Japan, and Singapore. Furthermore, while $1.76 billion was committed to 21 new crypto venture funds in Q2, the number of newly launched funds remained near a five-year low, signaling continued investor caution and a competitive landscape where spot exchange-traded products (ETPs) and digital asset treasury companies are increasingly vying for institutional capital that might otherwise flow into early-stage crypto ventures.

In this evolving landscape, specific areas like AI-integrated blockchain infrastructure, trading platforms, and early-stage (pre-seed) ventures continue to draw consistent interest and deal flow. The dynamic nature of the crypto market, influenced by technological advancements and policy shifts, suggests potential for future growth. Improving policy support within the United States for digital assets could significantly bolster domestic leadership and potentially revitalize venture allocations in the latter half of the year. This period of adjustment and targeted investment reflects a maturing market that, despite volatility, continues to innovate and attract strategic capital toward foundational and high-potential areas within the digital asset ecosystem.

The Macquarie Asset Strategy Fund experienced a dynamic second quarter in 2025, recording positive returns for its Institutional Class shares despite trailing its established benchmark. This period was characterized by significant market shifts, influenced by evolving geopolitical tensions, varied sector performances, and nuanced central bank policies. The fund's global equity component emerged as the principal driver of its overall positive performance, demonstrating resilience amidst market fluctuations. While fixed income investments also yielded positive returns, their growth did not match the robust performance observed in the equity segment, highlighting a clear divergence in asset class contributions. Key to the fund’s sectoral success was astute stock selection within the industrial and communication services sectors, which significantly bolstered returns. However, these gains were somewhat tempered by less favorable outcomes in the utilities sector, indicating the uneven impact of market dynamics across different segments. Overall, the quarter underscores the complex interplay of global economic factors on investment portfolios and the strategic importance of diversified asset allocation.

Macquarie's Asset Strategy Fund navigated a quarter marked by considerable market turbulence, managing to secure a positive return for its institutional investors even as it fell short of its benchmark. This outcome reflects a period where global financial markets were highly reactive to geopolitical developments, trade policies, and shifts in monetary strategies by central banks. The fund's equity holdings, particularly within global markets, proved instrumental in driving its overall positive trajectory, showcasing the benefits of strategic equity exposure during volatile times. Conversely, although the fund's fixed income portfolio also yielded positive results, its contribution was modest compared to the more dynamic equity returns, underscoring a prevailing preference for growth-oriented assets. The fund's performance was further shaped by its tactical sector allocations and specific security selections; for instance, strong performances in industrial and communication services stocks provided substantial upside. Nevertheless, these successes were partially counterbalanced by challenges faced in the utilities sector, illustrating the sector-specific headwinds that can impact even well-diversified portfolios. This quarter's results provide valuable insights into the fund's positioning and its ability to generate value in a complex and frequently unpredictable market environment.

Quarterly Performance and Market Overview

In the second quarter of 2025, the Macquarie Asset Strategy Fund's Institutional Class shares generated a positive total return, although it did not surpass the Fund's benchmark. The global equity portfolio was a primary contributor to this performance, while the fixed income component, despite being positive, yielded lower returns than equities. At a sector level, strong stock selection in industrials and communication services boosted results, partially offset by underperformance in utilities.

The second quarter of 2025 presented a complex market landscape. April was particularly volatile, with the S&P 500 Index experiencing a significant downturn following new US tariffs, losing almost 9%. This period was characterized by a confluence of geopolitical shifts, sector-specific performance disparities, and evolving central bank policies, all contributing to heightened market uncertainty. The global equity sleeve of the Macquarie Asset Strategy Fund proved to be a critical factor in cushioning the overall portfolio against these headwinds, demonstrating its capacity to identify and capitalize on opportunities even in challenging environments. The disparity in performance between equities and fixed income highlighted a market favoring growth assets, a trend that required astute management to maintain positive returns across the diverse portfolio. These dynamics emphasize the importance of active management and strategic allocation to mitigate risks and capture gains amid turbulent market conditions.

Asset Allocation and Sectoral Contributions

The fund's asset allocation strategies and individual security selections played a crucial role, with the global equity segment leading the positive returns. The fixed income portfolio also added value, though its contribution was less pronounced than that of equities, reflecting broader market trends where bond yields faced pressure.

A closer examination of the fund's internal dynamics reveals that strategic allocations within global equities were the backbone of its Q2 2025 performance. This segment effectively capitalized on specific market uptrends, demonstrating the fund's analytical edge in stock picking. The fixed income portion, while positive, faced various pressures, including interest rate fluctuations and shifts in investor sentiment, which limited its overall impact relative to the more vibrant equity markets. Furthermore, the fund's sector-level decisions underscored its strategic insights, with particularly strong showings from its holdings in industrial and communication services companies. These sectors benefited from favorable economic conditions or company-specific catalysts that the fund was able to leverage. Conversely, some drag on performance came from the utilities sector, indicating that while diversification is key, not all segments performed uniformly well. This highlights the ongoing challenge of navigating a market where different sectors respond disparately to macroeconomic shifts and policy changes, demanding continuous re-evaluation and adaptability in portfolio construction.