There are good reasons why pension funds should not invest in cryptocurrency and blockchain. The industry is very new, very fluid and technically intimidating. Furthermore, rules and regulations for this sector have not yet been defined.
However, the financial instruments that pension funds usually prefer, such as long-term government bonds, are practically unprofitable these days, so traditional pension funds support a dilemma about where to find returns in an ever-growing world. horizon?
Therefore, it should come as no surprise that pension funds, which are more cautious with institutional investors, are now examining the growing cryptocurrency / blockchain sector.
“Family offices have been increasing their fees for cryptocurrencies for several years, but we are seeing an increase in interest in pensions and many pensions are now crypto-vulnerable,” said Stephen McKeown, a professor of finance and partner at the University of Oregon. on Collab + Currency, tells Cointelegraph.
“Over the past year, we have seen increased interest in pensions” – part of the small growth across all institutional sectors – “which we believe reflects the growing complexity and institutionalization of the digital asset ecosystem,” said Kristen Sandler, sales manager and marketing. and added Fidelity Digital Assets Research. combined with powerful, holistic storytelling based on the pandemic response. ”
According to Sandler, pension funds tend to be “more conservative and risk-averse investors compared to other sectors”, and they generally prefer investments that have shown long-term growth and low volatility, which may make them skeptical of crypto / blockchain. … Place.
One of the first followers
The Fairfax County Police Officers’ Pension System was one of the first U.S. pension funds to invest in blockchain companies, headquartered in Fairfax, Virginia. Katherine Molnar, the fund’s investment director, told Cointelegraph at a recent SALT conference in New York that she tested the water again in 2018, giving 0.5% to a fund that has invested in blockchain-related institutions.
In 2019, the fund increased its stake to 1%, and in the spring of 2021, it added two new blockchain-related investment funds. The current target distribution is 2%, but due to the rising value of a crypto- and crypto-based business, 7% of all fund assets are now crypto-related – and again there are often “gather and pop” institutions that support industries – such as cryptocurrency exchanges and depot recipients.
Molnar explained that the pension fund cannot rebalance because it invests in venture capital funds, but in mid-September Fairfax announced its intention to invest $ 50 million in Parataxis Capital, a crypto hedge fund that invests in digital currencies and crypto derivatives. “It’s not a directional effort, but it’s not entirely illiquid either,” she told the Cointelegraph.
The fact that until recently, the police pension fund has invested in cryptocurrency-related companies instead of cryptocurrencies – such as Coinbase instead of Bitcoin (BTC) – is also common. U.S. institutional investors surveyed by Fidelity Digital indicated a greater propensity for investment products in digital assets rather than direct ownership of cryptocurrencies, Sandler told Cointelegraph, adding:
“We also know from our research that pension funds and defined benefit plans, like many other segments of institutional investors examined, have a preference for proactively managing an investment product that includes digital assets.”
Now other pension funds can also follow this path. “We are beginning to see participation not only from the hedge fund sector, in which we have long been involved, but also from other funds, pensions and endowments,” said Michael Sonnenshin, CEO of Grayscale Investments – the largest digital property manager – Bloomberg told Bloomberg earlier in years and added that he expects pension funds and donations to drive the future growth of his investment company.
Even pension fund giants like the California Government Employee Retirement System (CalPERS) have thrown themselves into the crypto / blockchain sea. CalPERS invested in bitcoin miner Riot Blockchain LLC a few years ago and has since increased its stake to 113,000 shares worth approximately $ 3 million in early October, albeit small compared to $ 133.3 billion in the CalPERS shareholding below management. , from the submission date 13 August.