Virginia pension fund diversifies into high-yield farming

Virginia-based $6.8 billion pension fund plans to start investing in the crypto lending market.

The Fairfax County Retirement System recently received approval from its board of directors to begin investing in yield farming. The decision came despite crypto lending being at the center of this year’s credit crisis in digital asset markets, costing retail investors huge losses and putting multiple companies out of business.

“Some of the yields you can achieve in a yield farming strategy are really attractive because some people have pulled out of the field,” Say Katherine Molnar, chief investment officer for the Fairfax County Police Retirement System. Parataxis Capital’s Digital Income Fund and VanEck’s New Financial Income Fund each received $35 million from Fairfax Systems.

crypto investment

Incidentally, the Virginia-based pension fund had already invested in cryptocurrencies before deciding to look further into yield farming. The Morgan Creek Blockchain Opportunity Fund received $10 million and $11 million in 2019 from the $5 billion Fairfax County Employee Retirement System and the $1.8 billion Fairfax County Police Retirement System, respectively,

The initial investment came a year after learning about the technology. “We went to a conference and we heard from an academic who taught a course on the subject,” Molnar said. “We are very interested in the prospects of this technology and its products.”

After extensive due diligence, pension managers primarily allocated initial allocations to companies providing infrastructure for the crypto market. The two pension funds then made seven more digital distributions, including private equity, hedge funds, and now yield farming strategies.

“We started with venture capital and private equity,” said Andrew Spellar, director of employee investments for Fairfax County. “But once we became more comfortable in this space, we started thinking more broadly about how we could use digital asset strategies in other parts of the portfolio.”

Despite market volatility this year, their success so far has injected confidence into further risk-taking. Despite an expected 50% hit this year, investment is still up 350%. “Our original paper is still convicted,” Molnar said. “Things will bounce back and stronger technology will probably stick around.”

Fidelity Investments caused a stir when it announced earlier this year that it would allow employers to offer bitcoin to employees in their 401(k). Meanwhile, Grayscale CEO Michael Sonnenshein predicts that more pension fund firms will add cryptocurrencies to clients’ portfolios.

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