State employees in Fairfax County, Virginia may be looking ahead to retirement with a pension funded by a less conventional investment class – cryptocurrency.
In what is understood to be a first, two pension funds that support state employees have invested in a digital assets based venture capital fund, Bloomberg reported on Tuesday.
Fairfax County Police and Fairfax County Employees’ pension plans – which combined, are responsible for managing $1.2 billion in assets – are the two pension funds that have invested in Morgan Creek Blockchain Opportunities Fund.
Whilst the two pension funds are the anchor investors in the venture capital fund, investment has also been secured from an insurance company, a university endowment and a private foundation.
For the most part, institutional investment has eluded the cryptocurrency sector. At an institutional level, fund managers are conservative and not comfortable with investing in the nascent sector due to fears of market manipulation.
According to CoinMarketCap, the cryptocurrency market has a total market capitalization of $120 billion at the time of writing. In the context of investment classes generally, this is just a drop in the ocean. Gold has a market capitalization of approximately $100 trillion whilst the S&P500 has a market capitalization in the region of $22 trillion. It’s for this reason that cryptocurrencies are particularly susceptible to market manipulation.
Fund managers also have concerns with regard to regulatory compliance when it comes to cryptocurrency. Some clarity was achieved in 2018 with regard to regulation but regulatory frameworks are still incomplete. There are also security concerns with regard to the storage of digital assets amidst a backdrop of multiple cryptocurrency exchange hacks in recent times.
Given the cryptocurrency bear market which has been ongoing since January 2018, many in the sector have been awaiting an influx of institutional money to bring the market back into