Two public pension funds, a hospital, a university endowment, and an insurance company have invested in Morgan Creek’s crypto fund. Digital Currency Group CEO Barry Silbert added that the U.S. pension fund market is $25.4 trillion, following the deal.
Noting that Mike Novogratz, a billionaire hedge fund legend and other prominent investors have been asserting that pension funds are typically extremely cautious in investing in a new asset class, for a while now. Investors added that as and when the first wave of pension funds invest in the crypto market this may lead the rest of the U.S. pension fund to enter the digital asset sector.
Novogratz said:
“What is going to happen is, one of these intrepid pension funds, somebody who is a market leader, is going to say, you know what? We’ve got custody, Goldman Sachs is involved, Bloomberg has an index I can track my performance against, and they’re going to buy. And all of the sudden, the second guy buys. The same FOMO that you saw in retail [will be demonstrated by institutional investors],”
Crypto Institutionalization
Ari Paul, the CEO of Pathfinder Venture Capital stated earlier this month that a variety of factors have slowed down the institutionalization of crypto. Institutional investors have had been reluctant to jump on the cryptocurrency wagon mostly due to the ambiguity surrounding assets in terms of regulatory frameworks.
Paul further elaborated that institutional investors consider cryptocurrencies as one of the three – a venture capital opportunity, hedge against the global economy, and an asset class for active trading. However, until recently neither of the three possibilities did manage to grab their attention. He added:
“For a. VC – investors want to see more coherent models for valuation and some success cases with real user adoption.
For b. Crypto as money or hedge, they want to see a pretty looking chart or at least consolidation, and stronger network effects (waiting on other institutions.). Also, want statistical evidence of it hedging fiat.
For c. Active trading or profits from providing services, they want to see more traditional institutions getting in to have confidence in the long-term plan and better regulatory clarity around the provision of services.”
A simple reason for the same is that the infrastructure supporting cryptocurrency did not grow in relative terms with global awareness and the overall adoption of the assets.
Though the tide seems to be changing, some even say that the market has made massive more progress in terms of institutionalizing in the last five months, way more than it did in the last five years.
Institutions slowly warming up
Now, that two public pension funds have committed to the crypto market, the inflow is expected to increase. As Ari Paul noted in a series of Twitter posts
“These things almost always follow a hockey stick kind of chart. Lots of slow building of a base of understanding and institutional buy-in, then a sharp ‘follow the leader’ effect.”
This morning our team at Morgan Creek Digital announced a new $40 million crypto venture fund anchored by two public pensions.The institutions aren’t coming.
They’re already here. ?
— Pomp ? (@APompliano) February 12, 2019