Key Takeaways
- • The Fairfax County Retirement Systems, a $6.8bn Virginia pension fund combining the $5bn Employee and $1.8bn Police Officers systems, has approved investing in crypto "yield farming" despite a 2022 credit crisis in digital asset markets, according to the Financial Times.
- • The pension system placed $35mn each with Parataxis Capital's digital yield fund and VanEck's new finance income fund, which lend to digital asset entities for fixed payment streams.
- • The move follows the $40bn collapse of stablecoin terra, which triggered bankruptcies at Celsius Network, Voyager and Three Arrows Capital and heavy losses for retail investors.
- • Fairfax's initial 2019 crypto allocations of $10mn and $11mn, mainly into blockchain infrastructure companies via the Morgan Creek Blockchain Opportunities Fund, are expected to have fallen about 50 per cent but remain up roughly 350 per cent.
- • The decision contrasts with Canada's CDPQ, which was hit by Celsius's withdrawal halt after investing in its equity.
Summary
The Fairfax County Retirement Systems, a $6.8bn Virginia pension fund, has gained approval from its board of trustees to begin investing in crypto yield farming, in which investors lend digital tokens to crypto projects in exchange for a fixed stream of payments, the Financial Times reported. The decision comes despite a crisis in the sector that has pushed several companies into bankruptcy and left retail investors with heavy losses.
Katherine Molnar, chief investment officer of the Fairfax County Police Officers Retirement System, said in an interview that some yields available in yield farming strategies are "really attractive" because some participants have stepped back from the space. She added that "for those that are still willing to provide liquidity, decent profit seekers, they're actually able to earn more attractive yields at the moment." The Fairfax system recently placed $35mn each with Parataxis Capital's digital yield fund and VanEck's new finance income fund, which aims to generate income through short-term lending arrangements with digital asset entities.
The credit crisis followed the $40bn collapse of stablecoin terra, a popular yield-farming tool, which sent shockwaves across the sector. Celsius Network, Voyager and hedge fund Three Arrows Capital have since entered bankruptcy, and many yield-farming projects offer returns well above bond markets while providing few of the investor protections found in traditional finance. Canada's Caisse de depot et placement du Quebec, a larger peer of Fairfax, was affected when Celsius halted client withdrawals and subsequently filed for bankruptcy; CDPQ had invested in the privately held group's equity the previous year.
Fairfax's existing crypto exposure predates this move. The Employee and Police Officers systems first invested $10mn and $11mn respectively in the Morgan Creek Blockchain Opportunities Fund in 2019, focusing mainly on companies providing crypto market infrastructure rather than tokens. The two systems subsequently made seven further digital allocations spanning private equity, hedge funds and now yield farming. Andrew Spellar, investment chief for Fairfax County Employees, said the systems started in venture capital and private equity and broadened their approach as they grew more comfortable with the space. The systems expect their initial digital asset investments to have dropped around 50 per cent amid this year's market turmoil, still leaving them up about 350 per cent. Molnar said, "We are still convicted in our original thesis. Things will bounce back and the stronger technologies will probably survive."
Katherine Molnar, chief investment officer of the Fairfax County Police Officers Retirement System, said in an interview that some yields available in yield farming strategies are "really attractive" because some participants have stepped back from the space. She added that "for those that are still willing to provide liquidity, decent profit seekers, they're actually able to earn more attractive yields at the moment." The Fairfax system recently placed $35mn each with Parataxis Capital's digital yield fund and VanEck's new finance income fund, which aims to generate income through short-term lending arrangements with digital asset entities.
The credit crisis followed the $40bn collapse of stablecoin terra, a popular yield-farming tool, which sent shockwaves across the sector. Celsius Network, Voyager and hedge fund Three Arrows Capital have since entered bankruptcy, and many yield-farming projects offer returns well above bond markets while providing few of the investor protections found in traditional finance. Canada's Caisse de depot et placement du Quebec, a larger peer of Fairfax, was affected when Celsius halted client withdrawals and subsequently filed for bankruptcy; CDPQ had invested in the privately held group's equity the previous year.
Fairfax's existing crypto exposure predates this move. The Employee and Police Officers systems first invested $10mn and $11mn respectively in the Morgan Creek Blockchain Opportunities Fund in 2019, focusing mainly on companies providing crypto market infrastructure rather than tokens. The two systems subsequently made seven further digital allocations spanning private equity, hedge funds and now yield farming. Andrew Spellar, investment chief for Fairfax County Employees, said the systems started in venture capital and private equity and broadened their approach as they grew more comfortable with the space. The systems expect their initial digital asset investments to have dropped around 50 per cent amid this year's market turmoil, still leaving them up about 350 per cent. Molnar said, "We are still convicted in our original thesis. Things will bounce back and the stronger technologies will probably survive."
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