The strong performance of digital assets this year has attracted the attention of several traditional funds in the market. News in the town is that several public pension funds in Virginia are seeking more direct exposure to cryptocurrencies.
The Fairfax County Police Officers Retirement System and Fairfax County Employees’ Retirement System are reportedly planning a $50 million investment in Parataxis Capital Management LLC’s main fund, which buys several cryptocurrencies and digital assets derivatives. Of course, this will be subject to board approval.s
The two Fairfax Fund together manage a total of $7.15 billion in net assets under management (AUM). Speaking to Bloomberg, Katherine Molnar, chief investment officer for the police officers retirement fund, said:
“We think that there’s going to continue to be volatility in crypto, and this is going to be good for value traders. It’s an area that’s going to grow in adoption and interest. We think that it’s inefficient enough, so we think there are some alpha opportunities to take advantage of.”
Previously, these Fairfax funds have made investments in Morgan Creek Asset Management funds and also crypto venture firms like Blockchain Capital. A majority of their investments went to startups operating in this space. Fairfax refers to them as venture capital investments.
Since the Parataxis fund focuses on actual cryptocurrencies, this gives Fairfax more direct exposure to digital assets.
Betting on the Crypto Market Volatility
The crypto market volatility has helped deliver outsized returns sometimes to the investors. As a result, Fairfax has been also expanding its investments in the crypto space. For e.g. Molnar had planned 2% crypto exposure for the $1.95 billion police officers’ retirement fund.
By the end of June, crypto accounted for 7% of the assets due to their strong price appreciation. Thus, crypto “was not an insignificant contributor to performance” in Q2, said Molnar.
But Molnar said that they are still not willing to directly buy crypto coins from the market. “Three years ago we weren’t comfortable making a bet on which cryptocurrency will rise to the top,” she said. “And I am not sure we are comfortable yet doing that today.”
Started two years back in 2019, Parataxis now has $55 million in AUM. The two Parataxis funds invest from Bitcoin to derivatives and even DeFi tokens like MakerDAO. Edward Chin, who started the Parataxis fund said:
“This is our first pension fund. We are in conversations with a couple more, and a couple of endowments as well. It’s clear that people are trying to get exposure”.