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Crypto plunge is cautionary tale for condition pension funds

Crypto plunge is cautionary tale for condition pension funds

MINNEAPOLIS (AP) — When the Houston Firefighters Relief with every one other accompanied by Retirement Fund bought $25 million inside cryptocurrencies, accompanied by the fund's leader investing officer touting their potential, former blaze Capt. Russell Harris was concerned.

Harris, 62, has attended the funerals of 34 firefighters killed inside the dash of duty. He was by that hour dated worried concerning his pension following an overhaul by condition with every one other accompanied by city officials gash payments while they grappled accompanied by the ability to pay not here benefits. He didn't see crypto, unproven inside his eyes, while an answer.

"I don't exist fond of it," Harris said. "There's excessively numerous pyramid schemes that everybody gets wrapped up in. That's the way I see this cryptocurrency at this time. ... There strength exist a place for it, nevertheless it's still new with every one other accompanied by nobody understands it."

The plunge inside prices for Bitcoin with every one other accompanied by other cryptocurrencies inside recent weeks provides a cautionary tale for the handful of condition pension funds that have dipped their toes inside the crypto pool over the past few years. Most have done it incidentally into and not here of stocks or investing funds that work for while proxies for the larger crypto market. A lack of transparency makes it difficult to tell whether they've made or lost money, permit all alone how much, with every one other accompanied by for the most small portion fund officials won't say.

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But the recent crypto meltdown has prompted a larger question: For pension funds that build sure teachers, firefighters, police with every one other accompanied by other condition workers receive guaranteed benefits inside retirement following condition service, is some amount of crypto investing excessively risky?

Many condition pension funds across the U.S. are underfunded, occasionally solemnly so, which leads them to lay clasp of risks to try to catch up. That doesn't always labour out, with every one other accompanied by the chance extends not fair to the funds nevertheless to taxpayers who strength have to bail them out, either into and not here of higher taxes or diverting spending away from other needs.

Keith Brainard, research director for the National Association of State Retirement Administrators, said he wasn't aware of additional than a handful of condition pension funds that have invested inside crypto.

"There may go nearer a day when crypto settles down with every one other accompanied by becomes adequately understood with every one other accompanied by mature while a potential investing that condition pension funds strength embrace them," Brainard said. "I'm fair not sure that we're there yet."

The U.S. Department of Labor urges "extreme care" inside crypto investments since of the high risks. The recent plunge inside crypto prices has caused Washington to additional closely scrutinize the freewheeling industry. After the collapse of $40 billion crypto good known while Terra, senators inside both parties have proposed legislation that would jurisdiction crypto for the earliest time, with every one other accompanied by Treasury Secretary Janet Yellen has called for additional oversight of crypto ventures.

The Houston Firefighters Relief with every one other accompanied by Retirement Fund's cryptocurrency investing wasn't extremely large — fair $15 million inside what was at that hour dated a $5.5 billion portfolio.

It's not understandable how that panned not here inside the cryptocurrency market glide this year. Officials from fund with every one other accompanied by the union didn't respond to multiple requests for comment. But the fund bought inside when bitcoin prices were near to their summit of almost $67,000, with every one other accompanied by they've been on the decline since then, dipping beneath $20,000 inside June.

The fund's chairman, Brett Besselman, said inside a first-quarter report that it was in good physical condition accompanied by an all-inclusive percentage of return of 33.7% inside 2021. Houston Mayor Sylvester Turner said earlier this year that the 2017 overhaul is employed well and, gratitude to strong returns inside 2021, has place his city's pension funds well ahead of scheme in the direction of eliminating their unfunded liabilities.

Houston's experiment, which fund managers touted while the earliest announced straight buy of digital assets by a U.S. pension plan, followed a series of bigger nevertheless indirect investments by set of two pension funds for Fairfax County of Virginia. They place over $120 million into funds that seek opportunities inside the crypto world, such while blockchain technology, digital tokens with every one other accompanied by cryptocurrency derivatives. As inside Houston, the Virginia investments are a tiny portion of the funds' $7.2 billion inside assets.

Since 2018, the Fairfax County Employees' Retirement System with every one other accompanied by Fairfax County Police Officers Retirement System have place money into venture first city funds that place money into inside blockchain with every one other accompanied by a hedge fund that seeks to harness some of the volatility inherent inside the space, said Jeffrey Weiler, administrative director of Fairfax County Retirement Systems. He said the goal was to place money into inside infrastructure that underlies blockchain technology, which managers carry on accompanied by to view while a high-growth area.

Crypto-related investments aren't necessarily deliberate. The Minnesota State Board of Investment manages a portfolio price around $130 billion for some condition employee pension plans with every one other accompanied by other entities. A recent report shows it held small stakes while of Dec. 31 inside the crypto exchange Coinbase Global with every one other accompanied by the bitcoin miners Riot Blockchain with every one other accompanied by Marathon Digital Holdings accompanied by a combined market price of $5.3 million. It too listed set of two holdings of fixed-income securities from Coinbase accompanied by a market price of $2.2 million.

Mansco Perry, the board's administrative director with every one other accompanied by leader investing officer, said the board invests laboriously inside merchandise indexes, so those holdings were most probable inside one of its register funds or were purchased by an external outside investing manager.

"We don't own cryptocurrency, nevertheless if a firm is large sufficient to exist inside an index, additional than probable we own it," Perry said.

The Minnesota board may look at crypto-related investments someday fair to learn concerning them, Perry said, "but it's not a high priority. ... I would speak we're nowhere near to making an investing decision to go forward, nevertheless that doesn't signify we never will."

The country's largest condition pension fund, the California Public Employees' Retirement System, known while CalPERS, took a tiny stake inside 2017 inside Riot Blockchain that grew to over $1.9 million by late 2020. Securities with every one other accompanied by Exchange Commission filings show it reached $5.4 million earlier to CalPERS got not here sometime inside the following quarter of 2021. Officials declined to present with details, nevertheless it was a miniscule amuse oneself inside CalPERS' total portfolio of well over $400 billion.

According to SEC filings, the State of Wisconsin Investment Board apparently began difficult the waters early last year accompanied by purchases of Coinbase, Marathon with every one other accompanied by Riot Blockchain. Those holdings grew to at least $19.3 million, opposed to a total portfolio of $48.2 billion, by the extremity of the earliest quarter this year. Board officials did not respond to requests for comment.

New Jersey's main condition pension fund appears from SEC filings to have started investing inside some crypto-related stocks inside the following quarter of 2021. As of the extremity of March 2022, the condition had concerning $9.5 million inside combined holdings inside Coinbase, Riot Blockchain with every one other accompanied by Marathon. New Jersey condition treasury officials said they don't remark on specific investments.

Other condition funds that have taken smaller stakes include the Utah Retirement Systems, which on one occasion held a $13.2 million stake inside Coinbase nevertheless doesn't anymore. The Pennsylvania Public School Employees' Retirement System held while a a large amount of while $2.6 million price of Coinbase last summer nevertheless was down to $681,000 by the extremity of the earliest quarter, following selling most of its stake, while adding concerning $398,000 price of Marathon starting inside the following fifty per cent of of 2021.

Harris, the former Houston blaze captain, said he sees his pension while a accord that should exist honored, specified the risks that firefighters routinely take. While he's normally contented accompanied by how his pension fund has performed, he's still uneasy concerning crypto. He too points not here that firefighters inside Houston with every one other accompanied by numerous other U.S. communities normally aren't eligible for Social Security.

"There's fair a a large amount of people not here there, if they mislay that pension it's over," Harris said. "Some of these older retirees, I fair do not know how they're surviving."

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Associated Press writers Ken Sweet inside New York with every one other accompanied by Geoff Mulvihill inside Cherry Hill, New Jersey, contributed to this report.

Crypto plunge is cautionary tale for condition pension funds

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