Two public pensions from Fairfax County, Virginia’s Police Officer’s Retirement System and Employees’ Retirement System, have invested in Morgan Creek’s new $40 million crypto fund.
Anthony Pompliano, a Morgan Creek general partner, said that it is the first case in which public pensions have invested in the cryptocurrency market.
Apart from the two pensions, the fund is said to be financed by a university endowment, a hospital, an insurance company, and a private foundation. It raised a total of $40 million.
Fairfax County Police Officer’s Retirement System chief investment officer Katherine Molnar said:
“Blockchain technology is being applied in unique and compelling ways across multiple industries. We feel it is important to be opportunistic and are excited to participate in this emerging opportunity, due to the attractive asymmetric return profile that it represents.”
Crucial First Step Towards Institutionalization of Crypto
The overwhelming majority of the crypto community has responded positively to the high-profile deal secured by Morgan Creek.
But some investors have questioned the $40 million figure and expected the fund to be larger given the involvement of public pensions.
However, the amount of capital involved in the monumental deal of Morgan Creek is of less importance.
The deal led to the entrance of the first group of public pensions into the cryptocurrency sector.
Public pensions are recognized for their conservative and cautious approach in investing. Due to the lack of properly regulated investment vehicles and trusted custodians in the cryptocurrency space, institutions have been reluctant towards investing in the asset class in the past several years.
The Morgan Creek deal has shown that institutional investors are opening up to the cryptocurrency sector and are beginning to become more comfortable with the asset class.
“The belief is this gives them great exposure to what we believe are some of the best risk-mitigated opportunities in a nascent industry. You can take a small amount of capital, you can put it in a nascent industry, you can manage your risk correctly but also get exposure to true innovation.”
Since late 2018, some of the largest financial institutions in the U.S. market in the likes of Fidelity, ICE, and Nasdaq have continued to strengthen the infrastructure supporting cryptocurrencies as an asset class.
The active involvement of widely recognized institutions in the crypto space could have fueled the confidence of other institutional investors in the traditional financial sector.
Could it Lead to an Influx of Institutions?
In mid-2018, Mike Novogratz, a billionaire investor and a former Goldman Sachs partner, said that once several institutional investors are committed to the cryptocurrency sector, more institutions will FOMO (fear of missing out) into the market.
“It won’t go there ($20 trillion) right away. What is going to happen is, one of these intrepid pension funds, somebody who is a market leader, is going to say, you know what? We’ve got custody, Goldman Sachs is involved, Bloomberg has an index I can track my performance against, and they’re going to buy. And all of the sudden, the second guy buys. The same FOMO that you saw in retail [will be demonstrated by institutional investors],” Novogratz said.
In the long run, the newly established cryptocurrency fund of Morgan Creek could set the foundation that may support the next wave of institutional investors in the cryptocurrency market.
The deal comes 14 months in the worst bear market in the 10-year history of the cryptocurrency market, which has proved that institutions are not focused on the price of digital assets but rather on the state of infrastructure that can handle an inflow of large capital into the market.
Last modified: March 4, 2021 2:53 PM