The Ohio Teachers Pension has no comments or records of its cryptocurrency investments

Ohio Teachers’ $100 billion pension fund recently responded to a public records request from a former board member who indicated that he held no records of his cryptocurrency investments. Later, in response to a media inquiry about crypto investments identified in their portfolio, state pension officials replied, “No comment.” So much for transparency and public accountability.

In response to a Forbes article on October 3rd, I wrote about a recent CFACFA
Institute study suggesting that most U.S. public retirement assets invest in cryptocurrency or companies exposed to cryptocurrency, James McGreevy, a former board member of the State Teachers Retirement System of Ohio, immediately sent a public filing request to the pension with the Question if STRS Ohio had any cryptocurrency investments. He received the following partial response from the fund:

“STRS Ohio does not invest directly in cryptocurrency and has not been able to identify any public records in its possession that are responsive to your query.”

The two key takeaways here (neither are surprising given prevailing public pension practices):

First, the pension says that since it is not invested direct (emphasis added) in crypto, there is no record of such investments in his possession (emphasis added). That said, like all public annuities I’ve studied (and contrary to prudent fiduciary practice), the annuity does not require underlying fund managers to disclose their riskiest portfolio holdings versus the annuity. Therefore, conveniently, the pensioner is neither told whether they invest indirectly in crypto nor asked about it. (In my experience, alternative investment advisors often advise public pension companies that agreeing to be kept in the dark when it comes to alternative investment fund portfolio holdings and strategies is best to avoid embarrassment, otherwise known as “headline risk.” .)

Second, STRS Ohio’s response does not address investing in cryptocurrency-exposed companies. (McGreevy appears to have neglected to ask about indirect cryptocurrency investments included in the CFA Institute study.)

In addition to disseminating his public notes to fellow retirees via email, McGreevy included a blog post written by Hank Kim, executive director and advisor to NCPERS (an organization essentially Wall Street-funded and devoted to defense of prevailing public pension practices – including the bad and ugly ones) posted specifically in response to my Forbes article on the organization’s blog.

Kim, who has no way of knowing for sure (because members of his organization don’t know themselves), reassures pension advocates in his blog post: “Siedle’s claim that your US state pension is gambling some of your hard-earned retirement savings on cryptocurrency is simple unfounded.” Kim blithely says, “As policymakers develop regulatory frameworks for digital currencies, perhaps US public pensions will invest as part of their long-term diversification and risk management strategies. Who knows, maybe one day?”

Far be it from me to speculate on what wild schemes our nation’s public pensions — often viewed by Wall Street as “the dumbest investors in the room” — might play next.

McGreevy, a former STRS Ohio board member, concludes the email he distributed to retirees with confidence that — apparently based on his inquiry about the pension and Kim’s unsubstantiated assurances to the public — “It seems like you can Remove cryptocurrency from your list of possible concerns regarding STRS investments.”

Not so fast.

Recently, on Dec. 2, Buyouts Insider published an article revealing that STRS Ohio took a cryptocurrency (FTX exposure) “hit” from a Thoma Bravo fund in which it invested. When asked by the publication, STRS Ohio – this time – reportedly responded with “no comment”. So much for public accountability in relation to retirement investing.

Regarding Kim, in addition to his duties at NCPERS, he is also the Vice Chairman of the Fairfax County Uniform Retirement System. While the pension he oversees has also invested in two Thoma Bravo funds, it is unclear whether those funds (or any of the other funds in which the Uniform Retirement System has invested) are invested in cryptocurrency or crypto-related companies.

However, the executive director of Fairfax County Virginia Retirement Systems has publicly acknowledged that both Fairfax County Employees’ and Police Officers’ Retirement Systems “have invested in something called blockchain technology.”

The Police Officers Retirement System has reportedly invested a staggering 7% of assets in crypto-related holdings, which is split between venture capital and hedge fund holdings, and “yield farming” by funds providing short-term loans to crypto-related companies.

When asked, “Is this a risky investment?” the executive director replies, “All investments involve risk and this investment is no different.”

Apparently, the executive director thinks he’s a lot smarter than the world’s largest investor, Warren Buffett, who declared back in 2020 that he was staying away from cryptocurrencies.

“Cryptocurrencies basically have no value and produce nothing,” he told CNBC’s Becky Quick in an interview with Squawk Box. “I don’t own cryptocurrency and never will,” he added.

Other investment and regulatory compliance experts have questioned the dipping of public pensions into crypto. John Reed Stark, an advisor who interviewed the CIO on the crypto-related holdings of the Fairfax County Police Pension, is a crypto critic and former head of the Securities and Exchange Commission’s Office of Internet Enforcement. “To me, this is perhaps the most reckless investment” a public fund has made in decades, he wrote in a LinkedIn post after an email exchange with the CIO. “FTX contagion has just started to spread,” Stark told MarketWatch. His interpretation of the position of CIO is that “you stand in a burning building and you think everything will be fine”.

In the coming weeks and months – despite the public pension blocking public records – hundreds of millions of direct and indirect losses in the public pension cryptocurrency will be uncovered. Get ready.

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