Canada’s largest single-profession pension plan, Ontario Teachers’ Pension Plan (OTPP), has decided to stay away from cryptocurrency investments after losing almost all of its investment in FTX. The pension plan, which manages $190 billion in assets, was one of the main backers of FTX, investing $95 million in the now-defunct exchange. However, the dramatic crash of FTX left the pension plan with virtually zero returns, prompting the organization to steer clear of cryptocurrency investments.
Jo Taylor, the CEO of OTPP, told the Financial Times that the decision not to invest in cryptocurrencies was based on “feedback from our members” and the “learnings” from the FTX investment. The pension fund’s investment in FTX accounted for less than 0.05% of its total assets, but it faced criticism for dealing with a company whose founder, Sam Bankman-Fried, is accused of fraudulent activities.
Bankman-Fried has been named by numerous agencies and investors as the main culprit behind the collapse of FTX. He is currently facing trial, and if found guilty, he could spend the rest of his life behind bars. The collapse of FTX is not the only bad experience Canadian pension funds have had with cryptocurrency. Caisse de dépôt et placement du Québec (CDPQ), another Canadian pension fund, lost $150 million after investing in Celsius’s cryptocurrency lending platform.
Despite conducting extensive due diligence, CDPQ still lost a significant sum, prompting CEO Charles Emond to acknowledge the risk involved in investing in cryptocurrency. However, he emphasized that his team had been cautious and accountable for their decisions.
After ‘FTX Meltdown’
The decision by OTPP to stay away from cryptocurrency investments is likely to impact the industry’s reputation and investor sentiment significantly. Many institutional investors have been hesitant to invest in cryptocurrencies due to their volatility and lack of regulation. However, with the increasing mainstream adoption of cryptocurrencies, some institutional investors have started to dip their toes into the market.
OTPP’s decision not to invest in cryptocurrencies may prompt other institutional investors to rethink their investment strategies, particularly those that have been considering investing in the volatile and largely unregulated cryptocurrency market. Still, it is essential to note that institutional investors such as pension funds have a fiduciary responsibility to their members and must invest their assets prudently.
OTPP’s decision to stay away from cryptocurrency investments after losing almost all of its investment in FTX highlights the risks involved in investing in the cryptocurrency market. It also underscores the need for institutional investors to conduct extensive due diligence and exercise caution when investing in the largely unregulated and volatile cryptocurrency market.