Public Pension Funds Venture Cryptocurrency Investment

As a new offshoot of Morgan Creek Capital Management LLC, Morgan Creek Digital has raised investments in the amount of $40 million from such big names as Coinbase, Bakkt, BlockFi, and TrustToken. However, apart from the industry heavyweights, several US-based public pension funds contributed significant amounts to the new venture. The fund received money from the Fairfax County Police Officer’s Retirement System (with $1.45 billion under management) and County Employee’s Pension plan (with $4.25 under management) — as well as some smaller contributors, including a University Fund, Hospitals chain, insurance company, and a private pension fund. The venture — founded by Pompliano, Jason Williams and Mark Yusko — will focus on seed rounds for cryptocurrency and blockchain startups. However, the fund will also maintain a small portfolio of digital assets and occasionally invest in projects with native tokens.

This morning our team at Morgan Creek Digital announced a new $40 million crypto venture fund anchored by two public pensions.

The institutions aren’t coming.

They’re already here. 🚀

— Pomp 🌪 (@APompliano) February 12, 2019

A Ticking Timebomb

The global pension-fund industry is in a dire state. It is no secret that many pension plans around the world are grossly underfunded and plagued with a variety of issues — from a lack of transparency and accountability to a low level of security and conflicts of interest. There is an enormous timebomb ticking and primed to blow up, leaving millions of socially vulnerable people with no means of support. The global population is aging. By 2050, we will have only four people of working age per one retiree, while the retirement age population will increase to 2.1 billion people from today’s 600 million. Currently, an estimated retirement savings gap across the eight largest pension markets amounts to $70 trillion. However, it pales in comparison to the projected gap increase to $400 trillion by 2050.

Bitcoin to the Rescue

Due to monetary expansion and unorthodox fiscal policies applied across developed countries, traditional risk-free investment instruments bear no interest. Thus, in the face of chronic undercapitalization and an ever-growing savings gap, pension funds’ asset managers have to look for new options with an attractive return profile. Investing in cryptocurrencies may be one of them. In December 2018, Pompliano wrote a detailed blog post in which he elaborated on a pension system timebomb and the ways Bitcoin can diffuse it. He cited Bitcoin’s non-correlation with traditional assets and asymmetric return profile as the two main reasons why investments in digital assets may become a solution to a global pension crisis. He also argued that the upside potential of owning Bitcoin is far greater than the risks of capital loss as the latter is capped by the invested amount while the former has no limits whatsoever. It seems that the seeds Pompliano planted with his post have started to sprout. Do you believe that pension funds’ involvement is a milestone event for the cryptocurrency industry? Let us know what you think in the comments below!