One institutional investor, Katherine Molnar, chief investment officer of the $1.9 billion Fairfax County Police Officers Retirement System in northern Virginia, is no stranger to digital assets.
In 2018, the police fund, along with a sister pension fund, the $5.1 billion Fairfax County Employees’ Retirement System, became the first known public pension funds to commit to a dedicated fund that invests primarily in blockchain technology firms — the Morgan Creek Blockchain Opportunities Fund, managed by Morgan Creek Digital Assets, a subsidiary of Chapel Hill, N.C.-based Morgan Creek Capital Management LLC. The employees fund committed $10 million and the police fund committed $11 million to the Morgan Creek fund in 2018.
Since then, the two Fairfax funds have made five additional digital asset-focused allocations, including two in recent months.
The employees fund invested $32 million in October and the police fund invested $18 million in November to Parataxis Capital, a multistrategy hedge fund focused on the digital assets sector. The two Fairfax funds also entered into a revenue-sharing agreement with Parataxis Capital, though Ms. Molnar declined to provide specifics. “We were happy to invest as a limited partner, but then we were particularly happy when we could negotiate a revenue share with them and be a strategic partner to them,” she said.
In January, the employees fund committed $40 million and the police fund committed $20 million to Polychain Ventures III, a venture capital fund managed by Polychain Capital focused on digital assets.
Ms. Molnar said her pension fund has seen solid returns from the digital assets to date and is bullish on its future. “We just think that there’s going to be a tremendous amount of growth in the digital asset space so we think that over time, many assets, and not just assets, but many things will become digitized,” Ms. Molnar said. “So it’s not just artworks or NFTs, but you’ll be able to buy digital or fractional shares of many different things, and it’s not just equities and bonds and typical financial assets, it’ll be anything and everything.”
She said her board will consider two additional digital asset funds at its May 11 meeting, though she declined to provide specifics ahead of time. She said the pension fund can’t share specific returns from digital asset funds.
Ms. Molnar said because her pension fund is not investing directly in a cryptocurrency such as bitcoin, it avoids the day-to-day volatility while getting exposure to the asset class.