Virginia pension fund likely to seek exposure to yield farming crypto funds

• If approved, the Virginia pension fund will offer liquidity to decentralized exchanges (DEXs).
• DeFi is the new craze in the crypto town as it manages to fascinate traditional financial institutions.

This year, several pension and retirement funds in the U.S. have shown interest in seeking exposure to crypto. As per the latest Bloomberg report, Fairfax County, Virginia, is seeking to put its pension fund money into crypto funds that use the popular investment strategy of Yield Farming.

Yield Farming is a popular investment strategy in the DeFi crypto space that involves lending and staking one’s digital assets and earning rewards in return. Katherine Molnar, chief investment officer at the Fairfax County Police Officers Retirement System said that if approved, the pension funds will be used in offering liquidity to decentralized exchanges (DEXs). “We view this as a growth investment,” Molnar said.

This is not the first time that Fairfax County is seeking exposure to crypto. Back in 2019, it became the first U.S. county to put pension funds in crypto-linked investments. Crypto markets attractive returns over the last decade have got everyone diving in. However, what’s surprising is that even government-backed institutions are joining the crypto bandwagon.

Molnar expects the investments to offer a yield of 9 percent. Fairfax’s investments in crypto are more than 8 percent of its total portfolio. Last year, Fairfax had a more direct bet on cryptocurrencies. The Fairfax County Police Officers Retirement System and Fairfax County Employees’ Retirement System made a combined investment of $50 million into Parataxis Capital Management LLC’s main fund. The Parataxis fund invests in several crypto tokens and crypto derivatives.

Wall Street players getting into DeFi

More and more Wall Street companies are seeking exposure to the world of decentralized finance (DeFi) and Fairfax is the latest among them. DeFi allows participants to borrow and lend anonymously without any third-party intermediaries like banks.

On Tuesday, May 3, Wall Street trading giant Jane Street said that it is turning to DeFi to borrow crypto. The New York-based trading giant will borrow $25 million in USDC stablecoin. It further plans to scale this borrowing up to $50 million. Jane Street will leverage Clearpool, a DeFi marketplace where institutions can get uncollateralized liquidity. Furthermore, it will borrow the stablecoins from crypto firm BlockTower Capital. In its report, Bloomberg noted:

This is the first time Jane Street is using decentralized finance to borrow crypto, a representative confirmed. They declined to comment on why the firm is doing so and how it’ll use the funds. They also declined to comment on whether the firm has borrowed crypto before.

A number of Wall Street players are also seeking crypto exposure to 401(k) retirement plans. However, U.S. lawmakers have warned about the risks of crypto and its high volatility.