Virginia's pension fund is investing in crypto loans to increase the return

A $ 6.8 billion of heavy pension funds from Virginia wants to increase its return by investing in crypto credit markets, despite a crisis in the industry that has driven several companies in bankruptcy and gave private investors serious losses.

The Fairfax County Retirement Systems recently received the approval of its board of trustees to invest in "Yield Farming", in which investors give their digital tokens against a fixed payment current of crypto projects.

"Some of the income that you can achieve with a Yield Farming strategy are really attractive because some of the people have withdrawn from this area," said Katherine Molnar, Chief Investment Officer of the Fairfax County Police Officers Retirement System.

The crypto loan allocation was the focus of this year's credit crisis on the markets for digital assets after the collapse of StableCoin Terra, which was a popular instrument for the Yield Farming, triggered $ 40 billion shock waves throughout the sector.

Several large companies that specialize in crypto loans, including Celsius Network and Voyager, as well as the HedgeGree Arrows Capital, went bankrupt, while numerous retailers who invested in risky Yield farming strategies had to accept severe losses. Many Yield Farming projects offer returns that are much higher than those on the bond markets, but offer little investor protection that can be found in traditional finances.

molnar said that "for those who are still willing to provide liquidity, decent profit seekers can actually achieve more attractive returns at the moment".

The Fairfax system recently placed $ 35 million at the Digital Yield Fund of Parataxis Capital and the new Finance Income Fund from Vaneck, which aims to provide investors through short-term credit agreements with companies for digital assets.

The Fairfax system's investment in this crypto-return fund was affected after his larger Canadian competitor, the Caisse de Dépôt et Placement du Québec, was affected by Celsius' decision to stop with the withdrawal of customers and the following insolvency application. As part of a bet on the future of blockchain technology, CDPQ invested in the equity of the privately kept group last year.

The pension system for employees in Fairfax County in the amount of $ 5 billion and the pension system for police officers in Fairfax County in the amount of $ 1.8 billion had already invested in crypto before making the decision to immerse themselves in earnings agriculture. In 2019, the pension funds invested $ 10 million or $ 11 million in the Morgan Creek Blockchain Opportunities Fund, a year after they were made aware of the potential of the technology.

"We were at a conference and heard an academic talking who teaches a course on this topic," said Molnar. "We were really fascinated by the promise of technology and its products."

The pensioners said they had carried out a comprehensive DUE diligence test before their first allocation, whereby the investment was mainly invested in companies instead of token that provide the installations for the cryptom market. The two pension funds then made another seven digital allocations that covered private equity, hedge funds and now Yield farming strategies.

"We started with venture capital and private equity," said Andrew Spellar, Investment Chief for Fairfax County Employes. "But when we felt more comfortable in this area, we started to think more about how we could use strategies for digital assets in other parts of the portfolio."

The systems said that their initial investments in the digital asset sector would probably be affected by about 50 percent of this year's market turbulence, but that would still increase the investment by 350 percent.

"We are still convinced of our original thesis," said Molnar. "Things will recover and the stronger technologies will probably survive."