Pension Funds Remain Interested in Crypto Despite Market Downturn

Despite this year’s bear market of “historic proportions”, pension funds across North America remain bullish on the crypto sector, according to The Wall Street Journal (WSJ).

Pension Funds at a Crossroad

According to the report, the interest is reflected in asset management firm VanEck, which notes that many pension funds have reached a crossroads in 2022, wondering whether to double down on crypto or otherwise throw in the towel.

Last year, one Houston-based firefighter pension fund put US$25 million into bitcoin and ethereum. While its investment is underwater, leadership understood at the time that “volatility and large swings are expected”.

Other pension funds are viewing the bear market as a potential opportunity for further investment at a substantial discount. While many funds don’t necessarily have conviction in the underlying crypto assets, some are willing to chase yields by engaging in yield farming.

Most notably, this has been adopted by a Virginia-based pension fund that told the WSJ approximately 4.5 percent of its US$6.6 billion in assets under management was being utilised for this purpose:

Not All Funds Got the Memo

Of course, not all pension funds have adopted this “forward-thinking” approach. Representing the views of most pension funds, one US$300 billion fund for teachers in California recently pronounced it was avoiding crypto altogether, due to its inherent volatility.

Recently it emerged that a Canadian pension fund had invested in Celsius, a crypto “bank” that has since declared bankruptcy. For those paying attention, it was self-evident that the yields were unsustainable, and more importantly the risk far outweighed any potential benefits. Unfortunately, this wasn’t sufficiently clear for many:

Institutions continue to lump Bitcoin and crypto in the same sentence. Until they take the time to understand the difference, malinvestment is likely to persist for the foreseeable future.