The head of the Virginia Police Pension System, Katherine Molnar, is exploring investing in funds that offer income farming as part of a strategy to boost income through asset volatility.
Fairfax County Police Pension System investment director Katherine Molnar said during the Milken Institute conference that the system is considering investing in two investment funds specialising in cryptocurrencies within three weeks. Molnar noted that the Fairfax pension system has already invested in two funds seven times, including venture capital funds and a structure that contains illiquid tokens at an early stage and liquid tokens at a later stage.
She specified that among these seven capital allocations they have employed different strategies to exploit cryptocurrency volatility. They now intend to invest assets in investment funds that specialise in different strategies for using cryptocurrencies, including farming, basis trading and inter-exchange arbitrage. Molnar believes that the system is ready to use new strategies to generate income, which only new cryptocurrency instruments can provide.
“Rather than being intimidated by the volatility of this asset class, we are trying to find a context in which it can be used. Volatility is very good for different financial strategies,” notes Molnar.
According to the chairman of the pension system, the two new hedge funds that the system works with use autonomous farming strategies. Income farming provides returns of 4% to 1,000% by placing or lending assets on decentralised exchanges. Molnar said it sees income farming as an alternative to fixed income and an opportunity to generate higher returns than from investing in traditional assets, which are critically dependent on economic conditions.
“We are using farming as a high-yield substitute with an expected return of 9-11%. This is slightly higher than fixed income,” Molnar noted.
In some cases, she said, the pension fund has already negotiated with hedge fund managers to spread investments more widely to generate higher returns.
It is worth noting that the Virginia police pension system’s investment in cryptocurrencies is the exception rather than a trend. In March, the US Department of Labor urged employers to exercise extreme caution when considering adding cryptocurrency to their retirement savings plan investment menu.