Pension Advisor Urges Institutions To Take Long-Term Crypto Bets

Pension Advisor Urges Institutions To Take Long-Term Crypto Bets

02/18/19 7:02 PM 2019-05-16 08:14:03
While crypto industry bigwigs incessantly talk a big game about the so-called “institutional herd,” few pillars of the legacy world have made a noticeable foray into this nascent ecosystem. Yet, innov

While crypto industry bigwigs incessantly talk a big game about the so-called “institutional herd,” few pillars of the legacy world have made a noticeable foray into this nascent ecosystem. Yet, innovators within the blockchain space are actively trying to amend this seeming issue.

Long-Term Bets On Crypto

Preeminent business news outlet Bloomberg recently reported that Cambridge Associates, a United States-based investment group that consults pensions & endowments, has called on institutional players to down the crypto red pill.

Per a research note obtained by Bloomberg, the group claims that while there have been short-term challenges in the cryptosphere, “it is worthwhile for investors” to start looking into securing long-term bets on crypto and blockchain. Cambridge did acknowledge that such investments “entail a high degree of risk,” but made it clear that these innovations have the potential to “upend the digital world,” likely touching on the asymmetric value that many commentators argue Bitcoin poses.

The analysts added that for those prepping to take the plunge, a “considerable amount of time” should be allocated to learn the nuances of this space, from learning about investment mediums to garnering knowledge about how this game-changing technology really works.

In closing, they did their best to calm wary prospective investors, who may have been turned off by 2018’s downturn, by writing:

“The dramatic declines that swept across the crypto space raised questions about the future of these assets and the blockchain technology that underpins them. Yet, in looking across the investment landscape, we see an industry that is developing, not faltering.”

American Pension Funds ‘Get Off Zero’

Cambridge Associates’ recent report and subsequent press coverage come after two American pension funds in Virginia’s Fairfax County “got off zero,” as some pundits would put it. Per reports from both Bloomberg and Forbes, the pension plan backing Virginia’s entire police force, along with another backing other state-employed workers, led Morgan Creek Digital’s recent $40 million round for a crypto venture fund.

In a statement cited by the two business-focused media portals, Katherine Molnar of Fairfax’s police officer retirement plan remarked that blockchain technologies are being “applied in unique and compelling ways,” and has an “attractive asymmetric return profile.”

While this is the first that the public has heard of this fund, Morgan Creek has already put “a material amount” of the funds to good use. A number of notable investments that Morgan Creek’s team has made include Bakkt, Coinbase, Harbor, and Blockfi, just to name a few notable crypto upstarts. Morgan Creek founder Anthony Pompliano claims that $4 million of the remaining funds could be directly siphoned into cryptocurrencies, like Bitcoin and Ethereum.

Every Pension Should Own Bitcoin

This ‘straight out of left field’ allocation from the Virginian pensions come just months after Pompliano took to his personal publication, Off The Chain, to tout the merits of a Bitcoin position for hedge funds and pension funds. According to the post, published in the midst of the holiday season, a potential solution to solve the impending pension crisis, whereas funds will likely default on some, if not most of their payments, is to simply buy cryptocurrencies. Bitcoin, for one, is a mostly non-correlated asset, with Pomp even calling it “the holy grail of any portfolio.”

Mike Novogratz of Galaxy Digital echoed Pomp’s statement, recently taking to Twitter to write that he doesn’t understand why “big macro funds” don’t even have a 1% position in cryptocurrency.

But, if past bouts of FOMO (the fear of missing out) are of any indication, there’s a good chance that more institutions will join the crypto fray soon enough, especially with venture groups, like Morgan Creek, and advisory groups, like Cambridge, that push the needle in this subsector.

Title Image Courtesy of Jan Senderek on Unsplash

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Brian Austin

Another great, informative article: thanks for sharing. Of course, there are reasons why, for now, the big macro pension funds have not (yet) opted for at least 1% cryptocurrency exposure. For example, perhaps, what I refer to as the F & F problem currently stifles risk: – First F stands for “Fish”. Are pension funds like a shoal of fish? Everyone is waiting for someone else in the shoal to make the first move, take the lead, so that the rest can watch what happens. Of course, with that plan, the “first movers” make the best gains, and quite rightly… Read more »