Minneapolis: Retired firefighter captain Russell Harris was concerned when the Houston Firefighters Relief and Retirement Fund bought $ 25 million in cryptocurrencies and the fund’s chief investment officer advertised its potential.
Harris, 62, attended the funeral of 34 firefighters who were killed on duty. He was already worried about pensions after state and city officials worked on their ability to pay benefits and cut payments. He, in answer, did not see the unproven code in his eyes.
“I don’t like it,” Harris said. “There are too many mud schemes that everyone is crazy about. That’s the view of this cryptocurrency at the moment …. there may be a place for that, but it’s still new and everyone has it. I don’t understand. “
The plunge in Bitcoin and other cryptocurrency prices over the past few weeks has alerted a few public pension funds that have set foot in the crypto pool over the past few years. Most do it indirectly through equity or mutual funds that act as agents for the larger crypto market. Lack of transparency makes it difficult to determine whether they have made or lost money, let alone how much money they have made, and in most cases fund officials do not say.
But the recent collapse of cryptocurrencies has raised even greater doubts: crypto for pension funds that ensure that teachers, firefighters, police, and other civil servants receive guaranteed benefits from post-civil servant retirement. Is investing in a currency too risky?
Many public pension funds across the United States are underfunded and sometimes seriously underfunded, putting them at risk to catch up. It doesn’t always work, and the risks extend not only to funds, but also to taxpayers who may have to bail out funds by raising taxes or diverting spending from other needs.
Keith Brainard, research director at the National Association of State Retirement Administrators, said he knows only a handful of public pension funds investing in cryptocurrencies.
“The day may come when cryptocurrencies will settle down and be fully understood and matured as potential investments that public pension funds may accept,” Brainard said.
The U.S. Department of Labor calls for “pay attention” to crypto investment due to its high risk. With the recent plunge in crypto prices, Washington has scrutinized the bohemian industry more closely. After the collapse of the $ 40 billion crypto asset known as Terra, Senators proposed a law to regulate crypto for the first time, and Treasury Secretary Janet Jellen called for further oversight of crypto ventures.
The investment in cryptocurrencies for the Houston Firefighter Relief and Retirement Fund wasn’t that big-it was only $ 15 million in what was a portfolio of $ 5.5 billion at the time.
It’s not clear how it slid in this year’s crypto market. Fund and union officials did not respond to multiple requests for comment. However, the fund bought it when Bitcoin’s price approached its peak near $ 67,000 and has been declining since then, falling below $ 20,000 in June.
The fund’s chairman, Brett Besselman, said in a quarterly report that the overall rate of return in 2021 was healthy at 33.7%. Houston Mayor Sylvester Turner said the 2017 overhaul was on track and that 2021 earnings invested his city’s pension fund much earlier than planned to clear unfunded debt. ..
The Houston experiment, which the fund manager advertised as the first to announce the direct purchase of digital assets through the US pension system, followed a series of larger indirect investments by two pension funds in Fairfax County, Virginia. They have invested more than $ 120 million in exploring opportunities in the crypto world, including blockchain technology, digital tokens and crypto derivatives. Like Houston, Virginia’s investment is a small fraction of the fund’s $ 7.2 billion assets.
Since 2018, the Fairfax County Employee Retirement Program and the Fairfax County Police Officer Retirement Program have funded venture capital funds that invest in blockchain and hedge funds that seek to take advantage of some of the space-specific variability. That’s what executive Jeffrey Wyler said. Director of Fairfax County Retirement Systems. He said the goal is to invest in the infrastructure that underlies blockchain technology, and managers continue to see this as a high-growth area.
Cryptographic investments are not always intentional. The Minnesota Investment Board manages a portfolio worth approximately $ 130 billion for several civil servant pension schemes and other entities. As of December 31, we have a small stake totaling $ 5.3 million in cryptocurrency exchange Coinbase Global and Bitcoin miners Riot Blockchain and Marathon Digital Holdings, according to a recent report. We also listed two holdings of bonds from Coinbase. The market value is $ 2.2 million.
Manscoperry, executive director and chief investment officer of the board, said that because the board invests heavily in stock indexes, these holdings are in one of the index funds or by an external investment manager. He said it was likely purchased.
“We don’t own cryptocurrencies, but if the company is big enough to be in the index, we probably do,” Perry said.
The Minnesota board may one day consider crypto-related investments and learn about them, Perry said. It doesn’t mean that you never do that. “
The California Public Employees’ Retirement System, the country’s largest public pension fund, made a small investment in Riot Blockchain in 2017 and exceeded $ 1.9 million by the second half of 2020. According to the Securities and Exchange Commission’s filings, it reached $ 5.4 million before CalPERS. I went out in the second quarter of 2021. Authorities didn’t give details, but it was a tiny play in CalPERS’s total portfolio, well over $ 400 billion.
According to SEC Filing, the Wisconsin Investment Board has purchased Coinbase, Marathon, and Riot Blockchain and started testing water bodies early last year. By the end of the first quarter of this year, these holdings had increased to at least $ 19.3 million, compared to $ 48.2 billion in the overall portfolio. Board officials did not respond to requests for comment.
New Jersey’s major state pension funds appear to have begun investing in some crypto-related stocks from SEC Filing in the second quarter of 2021. As of the end of March 2022, the states are Coinbase, Riot Blockchain, and Marathon. New Jersey Treasury officials said they would not comment on certain investments.
Other public funds with smaller investments include the Utah Retirement System, which once invested $ 13.2 million in Coinbase but no longer owns it. The Pennsylvania Public School employee retirement plan, which held $ 2.6 million worth of Coinbase last summer, fell to $ 681,000 by the end of the first quarter after selling most of its stake. From the second quarter, we have added a marathon worth about $ 398,000. Half of 2021.
Harris, a former Houston fire brigade commander, said he considers pensions to be a respectable contract given the risks that firefighters carry on a daily basis. He is generally happy with the performance of the pension fund, but he is still worried about cryptocurrencies. He also points out that firefighters in Houston and many other US communities are generally not eligible for social security.
“If you lose your pension, many people have lost their pension. Some of these older retirees don’t know how they survive,” Harris said.