If I were a Houston firefighter I would be majorly upset.

Among the investors who bet on cryptocurrency over the past year are pension funds that manage public workers’ retirement savings. Now those funds are navigating the crash.

A Quebec pension fund made a $150 million equity investment in Celsius Network LLC last fall. In July, the cryptocurrency lender filed for bankruptcy protection.

A $5 billion retirement fund serving Houston firefighters said last October it had put $25 million into bitcoin and ether. Since that announcement, both cryptocurrencies have fallen by more than 50%.

“Of course we would have preferred otherwise,” Houston Firefighters’ Relief and Retirement Fund investment chief Ajit Singh said in an email. But “volatility and large swings are expected.”

NEWSLETTER SIGN-UP
WSJ Crypto
Smart and accessible crypto market analysis for investors.

PREVIEW

SUBSCRIBE
Public pension funds have increasingly ventured into less-traditional assets during the past two decades in response to low fixed-income yields. Unable to rely on bond returns to hit aggressive 7% investment return targets and pay trillions of dollars in promised benefits, retirement officials have invested in private equity, real estate and even forestland.

Over the past few years, as crypto investments boomed alongside stocks during the stimulus-fueled economic recovery, some retirement-fund managers and advisers saw opportunity.

At two conferences last year, the Texas Association of Public Employee Retirement Systems held a series of panels on crypto, including one titled “Cryptocurrency in Your Portfolio: Are Pension Systems Ready to Dive In?”

VanEck, one of the investment firms featured on the panel, has received inquiries about crypto investing from more than a dozen public pension funds around the country in the past few years, said Kyle DaCruz, director, digital assets product.


A Quebec pension fund made a $150 million equity investment in Celsius Network, which filed for bankruptcy protection in July.
PHOTO: ANDRE M. CHANG/ZUMA PRESS
The association’s executive director, Art Alfaro, called cryptocurrency “an asset class which should not be ignored.”

“Our including them in our educational forums may someday be considered like including educational sessions on the internet in the mid-90s, or the iPhone introduction in 2007, or electricity in the early 1900s,” Mr. Alfaro wrote in an email.

Federal regulators are less enthusiastic. The Labor Department in March told 401(k) plans to exercise extreme care in allowing participants to invest in cryptocurrency, and a senior labor official said in April the crypto market isn’t ready for people’s retirement savings.

CDPQ announces investment in Celsius
2011
'15
'20
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
$80,000
“Both the returns and the risk are at a different order of magnitude than traditional well-regulated assets,” said Gil Luria, a strategist at D.A. Davidson who has been studying cryptocurrency for years.

Still, Mr. Luria said, “yield chasing has been the sport of pension funds for a while and technology crypto assets overall have had such spectacular returns over the past 12 years that it’s not surprising that yield chasers would at least dip their toes into the water.”

The prices of bitcoin and other cryptocurrencies have plunged repeatedly from their November peak as stocks have fallen and investors have pulled back on risk. Individual investors have lost their savings, major crypto firms are laying off workers, and roughly $2 trillion in cryptocurrency value has disappeared.

The Caisse de dépôt et placement du Québec, which serves more than six million workers and retirees, backed away from Celsius after the crypto lender paused withdrawals in June.

CDPQ has hired a lawyer to represent it in the bankruptcy filing, according to court documents. As an equity investor, it would typically fall in line behind the crypto lender’s creditors in recouping any lost money.

The roughly $330 billion Canadian pension fund viewed the original investment as a way of getting familiar with a potential new wave in finance while risking little investment capital, according to a person familiar with the matter. The total investment was $150 million, the person said.



Mr. Singh said the Houston firefighters’ fund views its cryptocurrency holdings—made through bitcoin company NYDIG, a subsidiary of alternative asset manager Stone Ridge—as a long-term investment, and intends to hold them for three to five years.

The pension fund, which serves more than 7,000 current and retired firefighters, remains interested in crypto, he said, but it isn’t making any additional investments at the moment.

Some pension officials looked at crashing crypto prices and saw an attractive entry point, however.

In May, a pair of Virginia pension systems approved a three-year, $70 million commitment to two funds that provide short-term loans to crypto-related financial firms offering services like crypto trading. The funds are managed by VanEck and Parataxis Capital.

“The yields are more attractive right now given that some people are less willing to do this given the crypto winter that we’ve endured,” said Katherine Molnar, investment chief of the Fairfax County Police Officers Retirement System.



The Fairfax police fund and its sister fund, the Fairfax County Employees’ Retirement System, have a total of $6.6 billion under management and about 30,000 beneficiaries. They have about 4.5% and 2.5% of assets, respectively, committed to crypto-related holdings, after rapid gains on a 2018 investment.

That holding, a stake in a venture-capital fund invested mostly in crypto technology, has already paid out more cash than the Virginia funds put in, according to the manager, Morgan Creek Capital Management, and its book value has quadrupled as of June 30.

Still, many are steering clear, like the $300 billion California State Teachers’ Retirement System.

“The risk is fairly high,” a spokeswoman said, “so we would set a high bar to invest in these opportunities.”


LINK: https://www.wsj.com/articles/p...48?mod=hp_lista_pos2

While investing does involve risk and "volatility," there are still plenty of them less "volatile" than crypto-currency.

quote:

“Of course we would have preferred otherwise,” Houston Firefighters’ Relief and Retirement Fund investment chief Ajit Singh said in an email. But “volatility and large swings are expected.”

Invest your own money and take your chances, then. Not with public pensions.

I don't know what the fuck these pension funds thing they were doing. They might as well have invested in penny stocks. It's not like they invested early in the game. Some people just got a big commission off the backs of the firefighters and other union people.

They may as well have taken that money to the casino.

You would think in order to first protect and then grow the money, they would go a route that’s safer.

The names of the people who made these decisions should be published for all to see.

Back in the 80s, a company I worked for started a 401K for employees.

They offered 2 options for investing your money. The first was 2nd mortgages which had sky high interest rates in those days and the second was the stock market with one of their employees picking the stocks.

I took 2nd Mortgages and virtually everyone else took stocks. At the end of a year, they were doing quite a bit better than me. At the end of the second year, their accounts had almost completely been depleted. The guy picked the wrong stocks. I don't know if they ever recovered or not.

Meanwhile, I was still doing great with 2nd mortgages.

Not everyone can pick stocks well.

I'm thankful for a couple things. One, that my deferred compensation plan wasn't affected by this, since it doesn't have the ability to invest in crypto. And two, that I was enough of a moron that I forgot to set it to invest after dumping my old 401k into it, and didn't realize it until after the covid market crash. So I was able to get in low and doubled my 401k contribution.

My first experience with public employee pension plans was during the early 1970s as a police officer in a major city. Plan was administered by the city council and on the verge of bankruptcy, unable to meet pension payments.

Plan was turned over to the state public employees retirement system (with our payroll contributions doubled). Administered by the state legislature, frequently used as a piggy bank for low interest loans for state projects.

Took early retirement in 1995, rolled all my retirement funds over into a self-directed IRA with a professional fund manager. Let it alone to grow. 27 years later, minimum annual distribution requirements have kicked in so I have to start drawing on the funds. The mandatory minimums are more than my highest salary during those working years, thanks to good investment management.

The word is spelled M-I-L-L-I-O-N-A-I-R-E. Much nicer than a little pension check, even after the recent downturn in the markets. I doubt that I will outlive the principal balance, which continues to grow (and is under my personal control, not some bureaucrat or politician).

quote:

Originally posted by Flash-LB:
Not everyone can pick stocks well.

True but you would figure they’d at least go for the stuff that has a history of paying dividends to reinvest and compound the earnings rather than swing for the fences. I don’t know, stuff that’s safe such as Apple, McDonald’s, Costco, Walmart, Exxon, Waste Management, etc.

But then again when you are gambling with someone else’s money, seems every bet is a good one.

Despicable. These people are fiduciaries and are expected, no, demanded to rise to a high standard of trust, fidelity and knowledge. If you don't understand a deal or an investment, don't do it. If you can't explain it to a client so the client understands it don't do it. Of course then you can't sit at the cool-kids table at the pension-fund cafeteria.

These feckless fuck-wits make me want to puke.