Ontario Teachers’ fund refrains from crypto after FTX loss worth $95 million

SNEAK PEEK

• Ontario Teachers’ Pension Plan dismisses $95 million investment in FTX.
• The new plans involve investment in real estate and exposure to private credit.
• Besides OTPP, Canada’s second-largest pension fund manager also had a tough time resulting from crypto failures.

Canada’s $190 billion Ontario Teachers’ Pension Plan mentions keeping away from the crypto sector after canceling an investment of $95 million in FTX. 

OTTP was one of the prominent money managers to support FTX and made investments in both 2021 and early 2022. The move was considered an indication that high-profile, blue-chip investors were approving of the rapidly-evolving; but moderately regulated, crypto space. 

In November 2022, OTPP canceled its overall stake after the crash of FTX. Sam Bankman-Fried, founder of FTX, is undergoing fraudulent charges. 

Jo Taylor, OTPP’s chief executive, said: 

“We’re still working through what exactly happened there, and you’re going to be careful.” 

He added that rushing into some other crypto investment would be unwise for them, as per the feedback from their members. 

The investment by OTTP was significantly small, at less than 0.05% of the total assets. Fortunately, the money has never come under inspection for making an investment in a firm whose founder has been accused of securities fraud as well as misusing the platform for his own benefit. Despite everything, Bankman-Fried has claimed not to be guilty of the accusations. 

Taylor further shared that they took time and performed ample due diligence on the business. He also opened up about not being shown every detail they should have known earlier to form a meaningful decision. 

Other than OTPP, there are other pension funds that have faced the wrath of crypto failures. For instance, Canada’s second-largest pension fund manager, Caisse de dépôt et placement du Québec, dismissed a crypto investment worth $150 million in Celsius, a crypto lending platform that crashed last year. CDPQ has also ended its foray into the crypto space, thanks to their experience with the Celsius investment.

Coming back to OTPP, Taylor shared receiving enough learnings from the investment. He added that they got feedback from members and regretted any loss. 

In 2022, OTPP emerged as one of the few worldwide pension plans that gave positive returns. At the moment, the funds are looking for new opportunities in real estate, though they are cautious due to the central bank’s battle to bring inflation under their control with a volatile increase in rate. 

Moving on, they are also considering exposure to private credit, where non-banks lend to private firms. The aim is to grow investment in this area by CA$10 billion during the coming three years.

OTPP believes that market dislocation is beneficial for long-term investors such as pension funds since they do not significantly depend on capital and debt markets for fundraising. 

Nick Jansa, investment lead for Ontario Teachers’ in Europe, the Middle East, and Africa, said that they have seen real estate opportunities in Europe, especially in Spain, the UK, the Netherlands, Germany, and France, for long-term money that doesn’t rely on certain normal market dynamics. 

There are opportunities that were not there before, ranging from life sciences to residential and logistics. 

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• Source: https://investorbites.com/ontario-teachers-fund-refrains-from-crypto-after-ftx-loss-worth-95-million/