Fairfax County, Virginia has targeted part of its pension fund toward investments in the Bitcoin and cryptocurrency industry, as well as blockchain technology in general. Now, they’re explaining why.
Fairfax County Retirement Systems Director Jeff Weiler published a post in response to CCN.com and other media’s reporting on the county’s decision to invest in Morgan Creek’s latest offering, the Blockchain Opportunities Fund. Oversubscribed from its intended $25 million, the fund invests in blockchain companies. It captured $40 million from two Fairfax County pension plans and other institutions.
First things first, the post gives specifics about the amounts invested. In total, the Virginia retirement system dumped $21 million into the fund. $10 million is from the county employee’s retirement fund while $11 million is from the police officer’s fund. They represent 0.3% and 0.8% of the funds’ total assets, respectively.
The post’s intention is to assuage any concerns that might have arisen in the minds of retirees. As CCN.com clearly stated, the play was not strictly a Bitcoin buy. Instead, Morgan Creek will use the fund to invest in blockchain companies like Coinbase and Bakkt, among others. The value of cryptocurrencies has less impact on exchanges. They earn commission whichever direction the market goes, making them “safer” investments. However, as Weiller notes:
“All investments involve risk and this investment is no different. However, as they would do with any investment, Fairfax’s investment team determined that the expected returns from this investment were in line with the level of risk incurred. This also played a big part in how much was invested.”
That said, Morgan Creek managed to convince the retirement overseers and others that up to 15% of the fund should be invested directly into cryptocurrency. Weiller says:
“No more than 15% of the funds will be invested in actual cryptocurrencies and, to-date, the Fund has no exposure to any cryptocurrencies.”
The current bear market might make that seem a risky play. But Morgan Creek can chart the stormy seas. A simple recovery to $5,000 would net a $5 million investment in Bitcoin a return of over $1.9 million. Such a recovery is far from out of the question, after all.
Morgan Creek’s Anthony Pompliano believes Bitcoin could still go below $3,000 before the bear market runs its course, which is likely the reason the fund hasn’t made any buys yet.
Bitcoin is viewed by many, including Barry Silbert, as the true “digital gold.” Gold is one of many long-term assets that pension plans seek exposure to in order to hedge long-term market chaos. Morgan Creek’s Blockchain Opportunities Fund is a first of its kind, but it’s unlikely the last. It’s a buyer’s market in cryptocurrencies right now. The next boom cycle could outsize all previous ones, as the bull run of 2017 did.
One existential issue raised by the entry of such money is that it will have to realize its gains. Buys in such scenarios will ordinarily have sell targets. Simply holding Bitcoin forever will not be an option, which means that, depending on the amount of money that enters the crypto-economy in this way, analysts might have a new metric to deal with in determining token performance.
Featured Image from Fairfax County Police Department/Facebook
Last modified: March 4, 2021 2:53 PM