Despite the ongoing market downturn, it appears that major financial institutions remain undeterred by the cryptoasset market, as the Fairfax County Retirement Systems, a U.S. pension fund with assets totaling $6.8 billion, has expressed its interest in investing in the crypto lending markets as a means to enhance its returns.
Katherine Molnar, the Chief Investment Officer (CIO) of the Fairfax County Police Officers Retirement System, highlighted the attractiveness of yields achievable in a yield farming strategy, especially as some market participants have withdrawn from this space. She mentioned, “for those that are still willing to provide liquidity, decent profit seekers, they’re actually able to earn more attractive yields at the moment.”
The pension fund recently allocated $35 million to both Parataxis Capital’s digital yield fund and VanEck’s new finance income fund. The latter aims to generate income for investors through short-term lending arrangements with crypto asset entities, indicating a growing interest in the crypto lending and yield generation sector among institutional investors.
The recent move into crypto lending markets is not the first foray into blockchain-related investments for the Fairfax County Retirement Systems. In 2019, its two subsidiaries, the $5 billion Fairfax County Employee Retirement System and the $1.8 billion Fairfax County Police Officers Retirement System, initially invested $10 million and $11 million, respectively, into the Morgan Creek Blockchain Opportunities Fund. This decision was made roughly a year after their managers were introduced to cryptoassets and the potential they offer to investors.
Katherine Molnar recalled, “We were at a conference, and we heard an academic who teaches a course on the topic speak. We were really intrigued by the promise of the technology and its products.”
“We are still committed to our original thesis,” she emphasized. “We believe that things will rebound, and the stronger technologies will likely endure.”
Pension funds are among the traditional financial institutions showing an increasingly positive stance toward crypto investments. A June 2022 report by international consultancy PwC revealed that, despite the current market volatility, a growing number of US hedge funds are investing in cryptoassets. Among traditional hedge funds surveyed, 38% were investing in digital assets that month, compared to 21% a year earlier. This demonstrates the evolving and expanding interest in cryptocurrencies and blockchain technology within the traditional finance sector.