Pension funds and crypto market: the Beginning of the movement.

[Paha87]

Last week, headlines began to appear that two state pension funds have become investors in a blockchain Fund managed by Morgan Creek. "Institutions here! there was a scream. "We knew this would happen!". This gave rise to a glee club that welcomed the news at the end of last year that the Yale endowment Fund was investing heavily in the blockchain sector through investments in two crypto-funds.

Much like this reaction, this is exaggerated - but the news is positive. The event highlights several General trends that point to the strengthening of institutional participation in the crypto market.

Not really

Let's see why this event is bloated:

Technically it is not "two state pension funds". These are actually two separate departments of the same investment program (Fairfax County pension systems).


These pension funds do not invest in cryptocurrencies, they invest in a venture blockchain Fund, which mainly invests in startups. The Fund may hold a relatively small amount of cryptocurrency (up to 15%), but currently does not.
The invested amount is small-only $ 21 million, which is less than 0.3% of the total pension Fund of Fairfax County.
And 15% of that (the maximum that can be allocated to cryptocurrencies in the blockchain Fund) is just over $ 3 million, which is a minor drop in the ocean when it comes to the crypto market.

Moving in the right direction

But what is really important is that we are talking about pension funds, as a rule, about the most conservative type of investment market participants. It's not that the pension Fund showed courage - they are not allowed to do it. The thing is, we have a pension Fund that thinks investing in blockchain is Mature enough that there is no need for bravery.

Pension funds also like long-term investments. Thus, this solution sends a constructive message that blockchain projects are not a means for rapid turnover of funds.

It is also worth noting that these are not just pension funds. Fairfax County is the most populous and one of the richest areas of one of the richest States in America.

The same circumstances

What worries Fairfax County can be seen across the country.

In 2017, the median funding ratio for government pension plans in the US was just over 70%, and in some States it was 30%. Better returns become less "pleasant" and more mandatory - meaning that the risk profile of pension funds (for better or worse) is likely to change in the coming years, which in turn will encourage managers to look for alternative investments with low correlation.

It is also important, but not surprising, that the first pension Fund started investing in blockchain from the public sector. A report released earlier this month By the center for pension research shows that in the US, 72% of government pension portfolios are in "risky assets" (stocks and alternatives) compared to 62% in private plans.

This is more logical than it seems: accounting rules require the private sector to use bond yields as discount rates; public sector plans can use the expected rate of return on their investments. The higher the risk, the higher the expected return and the lower the funding required.

Only the beginning of movement

Thus, although we cannot conclude that "institutions are here" however, we can expect to see more of these events - state pension funds in the US may find that investments in blockchain projects and cryptocurrency have an acceptable risk profile.

Fund managers, especially conservative ones, tend to move like a herd, so this can happen relatively quickly.

This does not mean that this will happen in the near future - the cryptocurrency market still needs some maturity in both infrastructure and liquidity. But Morgan Creek's announcement, as well as a recent report from Cambridge Associates urging agencies to start looking at the sector, indicate that the shift has begun.

Link - https://altstake.io/news/pensionnye-sredstva-ikriptorynok-nachalo-dvigheniya